A REPORT 


ON 

THE  ACCOUNTS  OF  THE  STATE 
OF  ILLINOIS 

BY 

GEORGE  E.  FRAZER,  C.  P.  A. 


PREPARED  FOR  THE 

EFFICIENCY  AND  ECONOMY  COMMITTEE 

CREATED  UNDER  THE  AUTHORITY  OF  THE 
FORTY-EIGHTH  GENERAL  ASSEMBLY 

STATE  OF  ILLINOIS 

Cv ' 

SENATORS 


WALTER  I.  MANNY,  Chairman  - Mt.  Sterling 

W.  DUFF  PIERCY  - - - - Mount  Vernon 

LOGAN  HAY  - - - - - - Springfield 

CHARLES  F.  HURBURGH  - - - Galesburg 

REPRESENTATIVES 

CHARLES  F.  CLYNE,  Secretary  - - Aurora 

SPEAKER  WILLIAM  McKINLEY  - - Chicago 

JOHN  M.  RAPP Fairfield 

EDWARD  J.  SMEJKAL  - - - - Chicago 


JOHN  A.  FAIRLIE,  Director  - - - Urbana 


THE  WINDERMERE  PRESS,  CHICAGO 


191 


CONTENTS  „ 

T 1 . 

Introduction  S-6 

I.  The  Present  Accounts  of  the  State  of  Illinois 7.37 

A.  Constitutional  Provisions  7-10 

Historical  N ote  7 

Legislative  Control  • V.'.*  7 

Financial  Administration  t/( '*.**."**  8 

Extent  of  Constitutional  Provisions .*.*.*.*.*.**.*.*  9 

B.  Legislative  Procedure  10-13 

Appropriation  Acts  U 

C.  Statutory  Provisions  for  Auditing  and  Accounting 13-21 

Auditor  of  Public  Accounts .13 

State  T reasurer  15 

Accounting 'and  Auditing  other  than  by  Auditor*  and  Treasur^ 

Auditing  Powers  of  Governor ] Ig 

Auditing  Powers  of  Secretary  of  State  and  ’ State  ’ Board  ’ of  * *Co^^ 

tracts  ‘ 2g 

Auditing  Powers  of  the  Civil  Service  Commission 19 

Auditing  Powers  of  the  Board  of  Prison  Industries 20 

Auditing  Powers  of  the  State  Architect 21 

The  Court  of  Claims *'.'*.*.*.*.!  *21 

D.  Accounts  and  Accounting  Procedure  in  the  office  of  the  State  Au- 

ditor  21-31 

1.  Revenue  Procedure  and  Auditing 21-25 

Accounting  for  the  Collection  of  State  Taxes.* .22 

Accounting  for  the  Collection  of  Inheritance  Taxes 23 

Collection  of  Revenue  other  than  for  Taxes 23 

“Receipt  Book  and  Receipt  Ledger” *.  ! *.23 

Auditing  of  Receipts !.*!.*!.*!  .24 

Cash  Audits  .25 

2.  Disbursement  Procedure  and  Auditing *.*.*.*  .25-29 

Appropriation  Ledgers  .*.*...26 

• Auditing  of  Disbursements **27 

3.  Classification  of  Receipts  and  Disbursement  Accounts 29 

4.  Perpetual  Inventory  ’ 3q 

5.  Reports  7 * ] ’ ’ * [ 7.  *.!*.!*.!  *31 

E.  Accounts  and  Accounting  Procedure  in  the  Office  of  the  State 

Treasurer  32-36 

Register  of  Warrants 32 

Accounting  for  Cash  Received *..**..**..**..**..**.!*.  .*  *.  .*  *.  .*  .*  ’.  .*  .*  .* ! !32 

Accounting  Procedure  for  Disbursements .33 

“Cash  Ledger”  * 33 

Local  Bond  Cash  Transactions 33 

Monthly  Reports  of  the  Treasurer 35 

State  Depositories  • .**..*!.**..*!.*!.*!.*!* 35 

Biennial  Report  of  the  Treasurer .*].*!.*].**..**..*  *.  .*  *.  .*!.’]  .*  *. ! *.  .*  *. ! .*  ] .*36 

F.  Conclusions  36-37 

List  of  Forms .*.*.*..*.*.*..*.*.*.*..*.*.*.*.*.*.*.*.  .37 


Page 

II.  Accounting  Needs  of  the  State  of  Illinois 38-64 

Introduction  38 

Auditing  Requirements  of  the  State 39 

The  Need  for  Financial  Information 40 

Accounting  Information  Needed  by  Members  of  the  General  Assembly 40 

Schedule  1.  Statement  of  Budget  Proposals  by  Funds 43 

Schedule  2.  Statement  of  Estimated  Revenues  for  the  General  Revenue 

Fund  44 

. Schedule  3.  Statement  of  Appropriation  Requests  from  the  General 

Revenue  Fund  44 

Schedule  4.  Comparison  of  Appropriation  Requests 45 

Reports  Needed  by  the  Governor 49 

Reports  Needed  by  the  State  Tax  Board 51 

Reports  Needed  by  the  State  Board  of  Equalization 51 

Accounts  and  Reports  of  the  Auditor  of  Public  Accounts 51 

Accounting  Needs  of  the  State  Treasurer 53 

Accounting  Needs  of  Revenue  Collecting  Agencies,..,. 53 

Accounting  Needs  of  Heads  of  Departments  and  Boards  in  charge  of  State 

Institutions 54 

Schedule  5.  Budget  Proposals  for  the,  State  Normal  School 55 

Schedule  6.  Department  of,  Free  Balances  in  Allotments 57 

Accounting  Needs  of  Institutional  and  Departmental  Executives.  58 

Accounting  Needs  of  Employes  of  Departments  and  Institutions .'..59 

Accounting  Needs  of  the  Public 59 

A Plan  of  Accounting  for  the  State 61 

Constructive  Accounting  Work  to  be  Done 63 


INTRODUCTION. 


The  resolution  of  the  Forty-eighth  General  Assembly  creating  the 
Efficiency  and  Economy  Committee,  provided  that  the  committee  “shall 
have  full  power  and  authority  to  investigate  all  departments  of  the 
State  government,  including  all  boards,  bureaus  and  commissions  which 
have  been  created  by  the  General  Assembly,  such  investigation  to  "be 
made  with  a view  of  securing  a more  perfect  ’system  of  accounting, 
combining  and  centralizing  the  duties  of  the  various  departments, 
abolishing  such  as  are  useless  and  securing  for  the  State  of  Illinois 
such  reorganization  that  will  promote  greater  efficiency  and  greater 
economy  in  her  various  branches  of  government.” 

After  its  organization,  the  committee  gave  careful  consideration  to 
the  work  possible  of  performance  under  this  resolution  before  the 
meeting  of  the  Forty-ninth  General  Assembly,  especially  with  regard 
to  the  sum  appropriated  by  the  General  Assembly  for  its  investigation. 
The  committee  was  of  the  opinion  that  its  energies  and  funds  could 
best  be  expended  on  the  consideration  of  a plan  for  the  reorganization 
of  the  administrative  work  of  the  State.  It  recognized  the  importance 
of  scientific  and  adequate  accounting,  and  the  desirability  of  providing 
a permanent  constructive  accounting  authority  to  prepare  adequate 
accounts  for  the  use  of  State  officers.  But  it  was  believed  that  any 
system  of  accounts  could  do  no  more  than  reflect  the  organization  of 
the  State,  and  that  major  results  towards  efficiency  and  economy  could 
best  be  secured  by  a reorganization  and  consolidation  of  the  greatly 
elaborated  system  of  administrative  bureaus,  offices  and  departments. 

The  present  accounting  system  of  the  State  is  inadequate,  and 
constructive  accounting  is  imperatively  needed.  This  report  presents 
an  outline  of  the  present  accounting  methods,  and  of  the  accounting 
needs  of  the  State.  In  a separate  report,  there  is  presented  an  illus- 
tration of  an  adequate  accounting  system  in  the  form  of  a proposed 
system  of  accounts  for  the  State  penal  institutions. 

The  report  prepared  by  George  E.  Frazer,  C.  P.  A.,  on  the 
present  accounting  system  of  the  State  was  made  for  the  use  of  the 
committee,  to  the  end  that  the  present  accounting  methods  might  be 
had  in  mind  in  planning  reorganization  of  various  State  activities. 
The  report  is  now  published  because  it  gives  in  brief  and  readable  form 
a summary  of  the  accounting  that  now  obtains  for  the  State.  Mr.  Frazer 
has  also  prepared  a brief  statement  of  the  accounting  needs  of  the 
State,  which  is  submitted  herewith,  with  the  recommendation  that  pro- 
vision be  made  for  a program  of  constructive  accounting  work,  and 
especially  for  a scientific  State  budget  and  control  over  the  obligations 
incurred  by  departments  and  institutions  that  must  subsequently  be 
met  from  State  funds. 


6 EFFICIENCY  AND  ECONOMY  COMMITTEE.  ] 

Professor  Spurgeon  Bell,  of  the  University  of  Texas,  has  prepared 
for  the  committee  a report  outlining  a comprehensive  system  of  ac- 
counts for  the  penal  institutions  of  the  State,  with  special  reference  to 
the  financial  control  of  penal  institutions  under  the  proposed  board  of 
prison  administration. 

These  reports  taken  together  will  serve  to  acquaint  the  members 
of  the  General  Assembly  and  the  citizens  of  the  State  with  the  account- 
ing needs  of  the  State,  and  with  the  results  that  may  be  expected  if 
an  adequate  system  of  State  accounting  is  provided.  The  reports  do 
not  present  a system  of  accounts  for  the  State,  since  such  a system  of 
accounts  as  the  State  needs  can  be  prepared  and  installed  only  after 
a careful  and  detailed  analysis  of  all  of  the  financial  transactions  of  the 
State,  of  the  organization  of  the  State,  and  of  the  functions  of  each  of 
the  State  departments  and  institutions.  Such  an  accounting  and  finan- 
cial study  is  needed,  arid  provision  should  be  made  for  it. 

John  A.  Fairlie. 


REPORT  ON  ACCOUNTS. 


7 


I.  THE  PRESENT  ACCOUNTS  OF  THE  STATE  OF  ILLINOIS. 

A.  CONSTITUTIONAL  PROVISIONS. 

Historical  Note. 

Article  II  of  the  first  State  Constitution  contained  two  sections 
relating  to  appropriations  and  expenditures,  as  follows : 

Sec.  20.  No  money  shall  be  drawn  from  the  treasury  but  in  consequence 
of  appropriations  made  by  law. 

Sec.  21.  An  accurate  statement  of  the  receipts  and  expenditures  of  the 
public  money  shall  be  attached  to  and  published  with  the  laws,  at  the  rising 
of  each  session  of  the  General  Assembly. 

In  the  second  State  Constitution,  the  above  provisions  were  con- 
tinued and  combined  in  Section  26  of  Article  III.  Another  section  of 
the  same  article  added  the  following: 

Sec.  22.  Bills  making  appropriations  for  the  pay  of  members  and  of- 
ficers of  the  General  Assembly,  and  for  the  salaries  of  the  officers  of  the 
government  shall  not  contain  any  provision  on  any  other  subject. 

The  Constitution  of  1870  continued  the  first  and  third  of  the  fore- 
going provisions,  and  further  elaborated  the  requirements  and  restric- 
tions relating  to  appropriations  and  loans. 

Legislative  Control. 

Under  the  Constitution  of  1870,  the  General  Assembly  is  given 
control  over  the  finances  of  the  State.  Section  18  of  Article  IV  provides 
that  each  General  Assembly  shall  provide  for  the  ordinary  and  con- 
tingent expenses  of  the  various  departments  of  the  State  by  making 
appropriations  for  the  period  ending  with  the  first  quarter  after  the 
adjournment  of  the  next  regular  session  of  the  General  Assembly. 

In  order  that  the  General  Assembly  may  be  provided  with  informa- 
tion as  a basis  for  the  making  of  appropriations  it  is  provided,  in  Sec- 
tion 21  of  Article  V,  that  all  public  officers  and  departments  shall  report 
to  the  Governor  at  least  ten  days  preceding  each  regular  session  of 
the  General  Assembly ; and  that  “the  Governor  may  at  any  time  require 
information  in  writing,  under  oath,  from  the  officers  of  the  executive 
department and,  in  Section  7 of  Article  V,  that  the  Governor  shall 
present  at  the  commencement  of  each  session  of  the  General  Assembly 
“estimates  of  the  amount  of  money  required  to  be  raised  by  taxation  for 
all  purposes.”  Section  10  of  Article  IX  of  the  Constitution  provides: 
“the  General  Assembly  shall  provide  such  revenue  as  may  be  needed  by 

levying  a tax,  by  valuation, ” on  real  and  personal  property, 

and  by  levying  fees  for  licenses,  franchises,  and  privileges. 

It  is  provided  in  Section  18  of  Article  4 of  the  Constitution  that 
“the  State  may,  to  meet  casual  deficits  or  failures  in  revenue,  contract 
debts,”  never  to  exceed  $250,000.  The  Constitution  does  not  provide 


8 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


how  any  debt  may  be  contracted,  and  the  matter  of  arranging  for  the 
contracting  of  debt  is  left  by  inference  to  the  General  Assembly.  (See 
Section  389  of  Chapter  120  of  the  Revised  Statutes,  empowering  the 
Governor,  Auditor,  and  Treasurer,  under  certain  circumstances,  to 
negotiate  loans  to  the  extent  of  $250,000.) 

It  is  seen  that  the  constitution  of  Illinois  provides  that  the  Governor 
shall  make  recommendations  to  the  General  Assembly;  and  that  the 
General  Assembly  shall  raise  revenue,  and  control  public  expenditures 
by  the  passing  of  appropriation  laws. 

Limitations  are,  however,  imposed  on  the  General  Assembly  in 
making  appropriations  and  authorizing  expenditures.  Section  16  of 
Article  IV,  provides  that : 

The  General  Assembly  shall  make  no  appropriation  of  money  out  of  the 
treasury  in  any  private  law.  Bills  making  appropriations  for  the  pay  of 
members  of  the  General  Assembly  and  for  the  salaries  of  the  officers  of 
the  government  shall  contain  no  provision  on  any  other  subject. 

Under  Section  19  of  Article  IV,  it  is  provided  that: 

The  General  Assembly  shall  never  grant' or  authorize  extra  compensa- 
tion, fee  or  allowance  to  any  public  officer,  agent,  servant  or  contractor, 
after  service  has  been  rendered  or  a contract  made,  nor  authorize  the  pay- 
ment of  any  claim,  or  part  thereof,  hereafter  created  against  the  State 
under  any  agreement  or  contract  made  without  express  authority  of  law; 
and  all  such  unauthorized  agreements  or  contracts  shall  be  null  and  void; 
Provided,  the  General  Assembly  may  make  appropriations  for  expenditures 
incurred  in  suppressing  insurrection  or  repelling  invasion. 

Section  20  of  Art  le  IV  provides  that: 

The  State  shall  never  pay,  assume  or  become  responsible  for  the  debts 
or  liabilities  of,  or  in  any  manner  give,  loan  or  extend  its  credit  to,  or  in  aid 
oh  any  public  or  other  corportion,  association  or  individual. 

Section  25  of  Article  IV,  provides  that  the  General  Assembly  shall 
provide  a legal  procedure  for  the  letting  of  State  contracts  for  fuel, 
stationery,  and  the  printing  and  binding  of  public  documents,  subject 
to  the  approval  of  the  Governor. 

Financial  Administration. 

The  enforcement  of  the  will  of  the  General  Assembly  as  to  the 
collection  of  revenue  and  the  disbursement  of  public  funds ^under  appro- 
priations is  placed  by  the  Constitution  in  the  hands  of  the  Auditor  of 
Public  Accounts  and  the  State  Treasurer.  Under  Section  17  of  Article 
IV,  the  disbursement  of  public  funds  is  dependent  on  an  appropri- 
ation that  is  passed  by  the  General  Assembly,  and  on  the  presenta- 
tion of  a warrant  issued  by  the  Auditor  of  Public  Accounts.  The 
same  article  makes  necessary  the  keeping  of  accounts  in  that  it  requires 
the  Auditor  within  sixty  days  after  the  adjournment  of  each  session  of 
the  General  Assembly  to  “prepare  and  publish  a full  statement  of  all 
moneys  expended  at  such  session,  specifying  the  amount  of  each  item, 
and  to  whom  and  for  what  paid.”  In  Section  7 of  Article  IX  of  the 
Constitution,  it  is  provided  that  all  taxes  levied  for  State  purposes  are 
to  be  deposited  in  the  State  treasury. 

In  Section  1 of  Article  V of  the  Constitution,  it  is  provided  that 

the  Auditor  of  Public  Accounts  and  the  Treasurer  shall  reside  at  the 


REPORT  ON  ACCOUNTS. 


9 


State  Capitol  during  their  term  of  office,  and  “keep  the  public  records, 
books  and  papers  there,  and  shall  perform  such  duties  as  may  be  pre- 
scribed by  law.” 

The  Constitution  apparently  contemplates  that  all  departments  and 
institutions  of  the  State  government  shall  be  subject  to  the  auditing 
powers  of  the  Auditor  of  Public  Accounts;  but  it  does  not  concentrate 
all  of  the  accounting  responsibility  in  his  office,  and  indeed  it  distinctly 
provides  that  the  Governor  is  to  account  directly  to  the  General 
Assembly  for  all  funds  subject  to  his  order.  (Section  7 of  Article  V.) 

Extent  of  Constitutional  Provisions. 

It  will  be  seen  that  the  Constitution  of  1870  provides,  either  directly 
or  by  inference,  for  practically  all  of  the  processes  of  governmental 
accounting. 

In  the  first  place,  the  Constitution  itself  provides  for  a complete 
State  budget  in  that : 

A All  State  officers  and  institutions  are  required  to  make  reports 
in  the  form  prescribed  by  the  Governor  at  least  ten  days  preceding 
each  regular  session  of  the  General  Assembly,  and  the  Governor  may 
specifically  require  reports  as  to  financial  condition.  (Section  21  of 
Article  V.) 

B At  the  commencement  of  each  regular  session,  the  Governor 
is  required  to  present  a report  to  the  General  Assembly,  summarizing 
the  condition  of  State  departments  and  institutions,  and  including  an 
estimate  of  the  money  required  to  be  raised  by  taxation  for  all  purposes. 
(Section  7 of  Article  V.) 

C The  General  Assembly  is  required  to  provide  necessary  revenue 
by  the  levying  of  taxes  and  fees  (Section  1 of  Article  IX),  and  to  pro- 
vide for  the  proper  disbursement  of  public  funds  by  the  passage  of 
appropriation  laws  covering  all  expenses  for  the  period  ending  with 
the  first  quarter  after  the  next  General  Assembly.  (Section  18  of 
Article  IV.) 

D It  is  specifically  provided  that  contract  debts  of  the  State  shall 
never  exceed  $250,000,  except  in  time  of  war  or  invasion  (Section  18 
of  Article  IV),  and  that  the  State  of  Illinois  shall  never  be  made  de- 
fendant in  any  court  of  law  or  equity.  (Section  26  of  Article  IV.) 

A careful  study  of  the  Constitutional  provisions  will  show  that 
the  present  Constitution  provides  complete  powers  and  the  necessary 
machinery  for  the  installation  in  the  State  government  of  a scientific 
budget  system. 

The  Constitution  also  specifically  provides  for  the  enforcement 
of  budget  control  by  the  Auditor  of  Public  Accounts,  and  for  the  safe 
keeping  of  public  funds  by  the  State  Treasurer.  The  General  Assembly 
is  given  power  to  pass  laws  providing  for  the  necessary  financial  pro- 
cedure in  the  office  of  the  State  Auditor  arfd  in  the  office  of  the  State 
Treasurer. 

While  the  Constitution  makes  necessary  the  keeping  of  accurate 
revenue  and  appropriation  accounts  it  is  silent  as  to  the  keeping  of 
accounts  showing  the  detailed  cost  of  each  of  the  activities  of  the  vari- 
ous State  departments.  It  may,  however,  be  safely  assumed  that  the  U 
heads  of  departments  cannot  fully  comply  with  the  Constitutional  re- 


10 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


quirement  as  to  biennial  reports  to  the  Governor  and  that  the  Governor 
cannot  fully  comply  with  the  Constitutional  requirement  as  to  the  char- 
acter of  his  biennial  message  to  the  Legislature,  unless  there  is  a 
complete  system  of  cost  accounting  for  each  of  the  State  offices  and 
institutions. 

The  Constitution  is  silent  as  to  the  keeping  of  such  accounts,  either 
in  the  office  of  the  State  Auditor  or  elsewhere,  as  will  show  the  assets 
and  liabilities  of  the  State  and  of  its  several  departments.  The  Con- 
stitution does  require  that  the  contract  debts  of  the  State  shall  never 
exceed  the  sum  of  $250,000.  It  is  difficult  to  see  how  this  provision 
of  the  Constitution  can  be  enforced  unless  an  account  is  kept  in  each 
of  the  State  departments  and  institutions  of  the  outstanding  contract 
obligations  of  that  department  or  institution. 

To  summarize,  it  may  be  said  that  the  Constitution  authorizes  the 
General  Assembly  to  pass  laws  requiring  the  executive  officers,  or  any 
one  of  them,  to  keep : 

A.  Revenue  accounts. 

B.  Appropriations  accounts. 

C.  Cost  accounts. 

D.  Asset  and  liability  accounts. 

B.  LEGISLATIVE  PROCEDURE.- 

Up  to  the  present  time,  there  has  been  little  or  no  preliminary  work 
before  the  meeting  of  the  General  Assembly  in  compiling  and  analyzing 
the  estimates  and  requests  for  appropriations.  Estimates  and  proposed 
bills  have  been  prepared  beforehand  by  the  various  officers,  depart- 
ments and  institutions;  and  a long  list  of  appropriation  bills  are  in- 
troduced by  individual  members.  Since  the  creation  of  the  Board  of 
Administration,  estimates  for  the  charitable  institutions  are  prepared 
by  this  board,  and  the  amounts  recommended  are  included  in  two  bills — 
one  for  ordinary  expenses  and  one  for  special  appropriations— each 
of  these  bills  covering  all  the  charitable  institutions.  Separate  bills  are 
introduced  for  each  of  the  other  public  institutions  and  for  some  of 
the  other  State  offices  and  departments;  and  a large  number  of  the 
offices  and  bureaus  submit  their  requests  to  the  Appropriation  Com- 
mittee, to  be  included  in  the  so-called  omnibus  bill  for  the  ordinary 
and  contingent  expenses  of  the  State  government. 

After  the  session  of  1913  had  begun,  a compilation  of  appropriation 
bills  was  prepared,  with  comparative  figures  showing  the  appropriations 
made  two  years  before.  But  this  contained  no  data  as  to  the  expendi- 
tures and  unexpended  balances ; while  the  various  items  showed  a wide 
variation  in  the  form  and  detail  of  the  proposed  appropriations  for  the 
different  offices,  departments  and  institutions. 

The  Act  of  1913  creating  a Legislative  Reference  Bureau  requires 
this  bureau  to  prepare  a detailed  budget  of  proposed  appropriations. 
It  is  made  the  duty  of  the  bureau : 

Sec.  5d.  To  cause  to  be  prepared,  printed  and  distributed  for  the  use 
xof  the  members  of  the  General  Assembly,  a detailed  budget  of  the  appro- 
priations which  the  officers  of  the  several  departments  of  the  State  govern- 
ment report  to  it  are  required  for  their  several  departments  for  the  biennium 


REPORT  ON  ACCOUNTS. 


11 


for  which  appropriations  are  to  be  made  by  the  next  General  Assembly, 
together  with  a comparative  statement  of  the  appropriations  by  the  preceding 
General  Assembly  for  the  same  purpose. 

Sec.  6.  The  officers  of  the  several  departments  of  the  State  govern- 
ment shall  make  duplicate  reports  by  the  1st  day  of  November  next  pre- 
ceding the  convening  of  the  next  regular  session  of  the  General  Assembly 
of  the  appropriations  which  are  required  for  their  several  departments  for 
the  biennium  for  which  appropriations  are  to  be  made  by  such  General 
Assembly.  One  of  said  duplicate  reports  shall  be  filed  with  the  Governor 
and  the  other  with  the  secretary  of  said  Reference  Bureau. 

These  provisions  form  the  first  step  towards  the  preparation  of 
a preliminary  budget  of  estimates  of  appropriations.  But  it  should  be 
noted  that  the  proposed  budget  will  be  simply  a compilation  of  the 
estimates  of  the  several  departments;  that  there  is  no  provision  re- 
quiring these^  estimates  to  be  prepared  on  a uniform  or  systematic  plan ; 
and  that  there  is  no  provision  for  including  a statement  of  expenditures 
to  compare  with  the  previous  and  proposed  appropriations.  There 
may  also  be  some  doubt  as  to  how  comprehensive  this  compilation  of 
estimates  will  be.  Does  the  phrase  '^departments  of  State  government” 
include  the  State  institutions  and  elective  officers,  or  is  it  limited  to 
those  officers  and  bureaus  whose  appropriations  are  included  in  the 
omnibus  bill? 

Each  house  of  the  General  Assembly  provides  for  a committee  to 
which  appropriation,  bills  are  referred.  The  membership  of  these 
committees  is  large — the  House  Committee  on  Appropriations  in  the 
Forty-eighth  General  Assembly  had  forty-four  (44)  members,  and  the 
Senate  committee  had  thirty-seven  (37)  members.  There  are  also 
several  other  committees  dealing  with  financial  measures — on  claims, 
contingent  expenses  and  on  revenue. 

Uporf  the  organization  of  the  Appropriation  Committee,  sub- 
committees are  appointed  by  the  chairman  to  visit  each  of  the  State 
institutions,  and  report  to  the  full  committee.  Joint  hearings  of  the 
appropriation  committees  are  held,  at  which  the  heads  of  the  various 
institutions  appear  to  explain  and  urge  their  requests  for  appropriations. 
After  these  hearings,  the  committees  pass  on  the,  various  bills,  and  pre- 
pare the  omnibus  bill,  making  such  changes  as  are  agreed  to. 

With  the  exception  of  deficiency  and  emergency  appropriations, 
the  approoriation  bills  are  not  reported  to  the  house  until  nearlv  the 
close' of  the  session.  At  this  stage,  the  chairmen  of  the  committees 
are  said  to  have  practical  control  of  the  appropriations ; the  committee 
recommendations  are  rarely  changed  in  either  house.  Tf  changes  are 
made  in  one  house  and  not  accepted  by  the  other,  the  bill  goes  to  a con- 
ference committee,  whose  report  is  almost  invariably  accepted. 

After  passing  both  houses,  appropriation  bills  go  to  the  Governor, 
who  may  disapprove  any  of  these  bills  or  any  item  in  any  of  them, 
within  ten  days.  A considerable  number  of  appropriations  are  regularly 
disapproved  by  the  Governor,  and  the  aggregate  appropriations  reduced. 

Appropriation  Acts. 

The  absence  of  any  comprehensive  preliminary  estimates  and  the 
numerous  bills  introduced  are  reflected  in  the  appropriation  Acts  as 
passed.  In  the  session  of  1913  there  were  94  separate  appropriation 


12 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


Acts  passed,  covering  116  pages  in  the  volume  of  session  laws.  Some 
of  the  leading  characteristics  of  these  measures  may  be  noted  in  the 
following  summary: 

SUMMARY  OF  APPROPRIATION  ACTS— 1913 


Ordinary  and  contingent  expenses  of  the  State  gov- 
ernment (omnibus  bill) — 

State  school  fund 

Other  items  (96  paragraphs) 

Pay  of  members  of  49th  General  Assembly  and  sal- 
aries of  State  officers,  no  items 

Charitable  institutions — 

Ordinary  expenses,  6 items 

Special  appropriations,  131  items 


University  of  Illinois,  U.  S.  grants  . . 

Normal  schools,  33  items 

Penal  and  reformatory  institutions — 
Five  bills 


National  Guard,  9 bills. 


Highway  Commission,  4 bills. 

Total,  23  bills 

Other  bills 

Grand  total  


$6,000,000.00 
, 5,863,825.24 

$11,863,825.24 

2,600,000.00 

$7,904,637.42 
, 2,636,405.47 
, 615,408.57 

11,156,451.46 

4,600,000.00 

1,235,500.00 

,$4,500,000.00 
, 100,000.00 

,$1,489,150.00 

57,839.44 

.$1,431,655.12 
. 318,090.53 

1,547,009.44 

1,749,745.65 

1,107,500.00 

$35,860,031.79 

2,055,326.14 

$37,915,357.93 

The  various  Acts  offer  the  most  startling  contrasts  in  the  extent  to 
which  appropriations  are  itemized.  That  for  the  pay  of  members  of  the 
General  Assembly  and  the  salary  of  State  officers  appropriates  $2,600,- 
000  in  one  sum.  The  amounts  paid  to  each  person  is  regulated  by  the 
salaries  provided  in  the  various  statutes;  but  the  appropriation  bill 
does  not  show  the  amount  for  each  office,  not  even  the  totMs  for  the 
General  Assembly,  the  executive  officers  or  the  judiciary.  The  appro- 
priation for  ordinary  expenses  of  the  charitable  institutions  ($7,904,- 
637.42)  is  made  in  six  items,  three  for  each  year;  and  the  appropria- 
tion for  the  state  University  ($4,500,000)  is  made  in  four  items,  two  for 
each  year. 

On  the  other  hand,  the  omnibus  bill,  while  including  the  school 
grant  of  $6,000,000  in  two  items,  appropriates  about  the  same  sum  in 
96  paragraphs,  most  of  which  are  itemized  in  detail.  The  special  ap- 
propriations for  charitable  institutions  are  specified  in  131  items, 
besides  a number  of  reappropriations  of  unexpended  balances,  not 
specified  in  the  Act. 

The  appropriations  for  the  five  normal  schools  are  included  in  one 
Act,  with  33  items.  But  the  appropriations  for  the  penitentiaries  and 
reformatory  are  in  five  separate  Acts;  those  for  the  Highy^ay  Com- 
mission are  in  four  Acts;  and  those  for  the  National  (juard  are  in 


REPORT  ON  ACCOUNTS. 


13 


nine  Acts.  Several  of  these  bills  include  provisions  for  the  reappro- 
priation of  unexpended  balances  of  former  appropriations,  the  amounts 
of  which  are  not  specified. 

Much  the  larger  part  of  the  appropriations  are  included  in  23  Acts ; 
while  71  other  Acts  make  separate  appropriations  aggregating  about 
$2,000,000.  One  appropriation  Act  for  sewer  improvements  at  Ottawa 
is  for  $286.50. 

The  entire  list  of  appropriations  covers  about  1,500  separate  items; 
but  there  is  the  widest  variation  in  the  character  of  the  items.  While 
in  a number  of  cases,  several  million  dollars  are  appropriated  as  one 
item ; in  many  other  cases,  the  amounts  for  salaries  and  expenses  are 
‘ specified  in  minute  detail.  Thus  the  appropriation  for  the  Grain  In- 
spection Department  includes  such  items  as  $75  a year  for  rubber 
stamps,  $50  a year  for  inspection  pans,  $50  a year  for  steel  bars,  and 
$75  a year  for  twine;  the  appropriation  for  the  State  Board  of  Ex- 
aminers of  Barbers  includes  an  item  of  $60  a year  for  the  secretary's 
bond;  and  the  appropriation  for  awards  made  by  the  Court  of  Claims 
includes  an  item  of  $7.90. 

This  minute  specification  of  minor  items  serves  no  useful'  purpose ; 
while  the  mass  of  such  details  makes  more  difficult  an  understanding 
of  the  purposes  of  the  appropriations.  On  the  other  hand,  the  large 
lump  sum  appropriations  practically  transfer  the  real  work  of  appro- 
priation to  the  managing  boards  of  the  departments  or  institutions. 
The  appropriations  for  each  office  or  institution  should  be  made  on  the 
same  general  plan,  showing  separately  the  amounts  for  salaries,  for 
other  current  expenses,  and  for  land  and  permanent  improvements,  with 
specifications  of  the  more  important  items  under  each  of  these  main 
divisions. 

C.  STATUTORY  PROVISIONS  FOR  AUDITING  AND  ACCOUNTING. 

The  General  Assembly  has  provided  accounting  and  auditing  pro- 
cedure both  in  general  laws  and  in  provisions  in  appropriation  accounts. 

Auditor  of  Public  Accounts. 

In  Section  7 of  Chapter  15  of  the  Revised  Statutes,^  the  auditing 
and  accounting  procedure  to  be  employed  by  the  Auditor  of  Public 
Acounts  is  very  specifically  set  forth.  The  Auditor  is  required  to 
“audit  all  accounts  of  public  officers  who  are  to  be  paid  out  of  the  State 
treasury,  of  the  members  of  the  Legislature,  and  all  persons  authorized 
to  receive  money  out  of  the  treasury,  by  virtue  of  any  appropriation 
made  or  to  be  made  by  law  particularly  authorizing  such  account.”  The 
Auditor  is  further  required,  under  Section  7,  to  keep  the  accounts  of 
the  State  “with  any  State  or  Territory,  and  with  the  United  States, 
with  all  public  officers,  corporations  and  individuals,  having  accounts 
with  this  State.”  This  wide  sweeping  statement  of  duties  was  passed 
in  1845,  and  has  not  since  been  amended. 

It  is  further  specifically  provided  in  Section  8 of  Chapter  15  that 
“on  ascertaining  the  amount  due  any  person  from  the  Treasury,  the 
Auditor  shall  grant  his  warrant  on  the  treasury  for  the  sum  due.” 


^References  are  to  Section  numbers  in  Hurd’s  Revised  Statutes,  1911. 


14 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


Sections  9,  10  and  11  provide  that  a fair  record  shall  be  kept  of  all 
warrants  drawn,  by  their  numbers,  that  the  Auditor  shall,  in  all  cases, 
personally  sign  all  warrants,  and  that  warrants  are  to  be  counter-signed 
by  the  State  Treasurer.  To  carry  out  this  provision,  it  is  further  pro- 
vided in  Section  19  of  Chapter  15  that  “the  Auditor  shall  credit  the 
Treasurer’s  account  with  the  amount  of  cancelled  warrants  returned  to 
him  monthly  by  the  Treasurer,  and  give  him  a receipt  for  the  same,  and 
shall  enter  the  date  of  cancellations  of  such  cancelled  warrants  in  his 
warrant  book.” 

In  issuing  warrants,  the  Auditor  is  to  take  into  consideration,  as  a 
set-off,  any  claim  that  may  be  due  to  the  State.  (Section  12  and  Section 
13  of  Chapter  15.) 

Proper  auditing  protection  is  required  in  the  issuance  of  duplicate 
warrants  on  account  of  warrants  that  have  been  lost  or  destroyed,  in 
that  the  payee  is  required  to  give  a bond  in  double  the  amount  of  the 
warrant,  and  to  pay  all  costs  and  charges,  should  the  State  afterwards 
be  compelled  to  pay  the  original  warrant.  (Section  14  of  Chapter  15.) 

These  provisions  are  summarized  in  Section  17  of  Chapter  15  by 
the  statement  that  “the  Auditor  shall  keep  a correct  record  of  all 
accounts  by  him  audited  in  books  to  be  kept  for  that  purpose.” 

It  will  be  noted  that  the  statutory  requirements,  so  far  as  expendi- 
tures are  concerned,  provide  only  for  the  auditing  and  recording  of 
disbursements  in  this  particular  from  the  State  treasury.  The  statutory 
requirements  in  this  particular  do  not  seem  to  extend  to  the  auditing 
and  accounting  by  the  State  Auditor  of  the  expenditures  of  public 
credit. 

Under  Section  17  of  Chapter  15,  the  State  Auditor  is  required  to 
“keep  an  account  of  all  taxes  or  other  moneys  which  may  be  due  by 
any  person  to  the  State,  and  also  on  account  of  all  amounts  which  may 
be  paid  into  the  State  Treasury.”  To  carry  out  this  requirement,  it  is 
provided  in  Section  20  that  “the  Auditor  shall  counter-sign  all  receipts 
for  money  issued  by  the  Treasurer,  and  charge  the  Treasurer  with  the 
amount  thereof.” 

It  will  be  noted  that  the  Auditor  is  required  to  keep  an  account 
of  revenues  as  well  as  an  account  of  receipts.  The  statute  is  very  plain. 
The  Auditor  must  “keep  an  account  of  all  taxes  or  other  moneys  which 
may  be  due  by  any  person  to  the  State,  and  also  an  account  of  all 
moneys  which  may  be  paid  into  the  State  Treasury.”  The  Auditor  is 
specifically  required  to  keep  an  account  with  the  entire  revenue  receiv- 
able of  the  State,  whether  the  revenue  receivable  is  taxes  receivable,  fees 
receivable,  or  moneys  receivable  from  fines,  forfeits,  sales,  or  the  like. 

It  will  be  noted  that  the  statutes  provide  a careful  auditing  pro- 
cedure by  the  requirement  of  the  exchange  of  countersigned  warrants 
'and  countersigned  receipts  between  the  offices  of  the  State  Auditor 
(the  auditing  agency  of  the  State)  and  the  office  of  the  State  Treasurer 
(the  cash  depositary  of  the  State).  No  such  auditing  procedure  is 
provided  for  the  control  of  accounts  payable,  or  accounts  receivable. 
In  order  that  the  exchange  of  countersigned  warrants  and  receipts 
may  have  more  auditing  effect,  it  is  provided,  in  Section  21  of  Chapter 


REPORT  ON  ACCOUNTS. 


15 


15,  that  “no  person  shall  be  employed  as  clerk  in  the  Auditor’s  office 
who  is,  at  the  same  time,  employed  in  any  capacity  in  the  Treasurer’s 
office.” 

As  a means  of  enforcing  the  auditing  duties  of  the  State  Auditor, 
the  statutes  provide  that  the  State  Auditor  shall  subscribe  to  an  oath, 
and  shall  give  a bond  in  the  sum  of  fifty  thousand  dollars  ($50,000) 
for  the  faithful  discharge  of  his  duties.  The  Governor  is  given  the 
right  to  require  an  additional  bond  whenever  he  shall  deem  it  necessary. 
(Section  3 of  Chapter  15.)  This  power  vested  in  the  Governor  should 
seem  to  make  him  in  a sense  responsible  for  the  character  of  the  audit- 
ing and  accounting  in  the  office  of  the  State  Auditor,  in  so  far  as  the 
proper  protection  of  the  credit  and  funds  of  the  State  is  concerned. 

An  important  statutory  provision  is  found  in  Section  i of  Chapter 
15,  requiring  the  Auditor  “to  deliver  up  all  papers,  books,  records  and 
other  property  appertaining  to  his  office,  whole,  safe  and  undefaced  to 
his  successor  in  office.” 

The  chief  public  protection  provided  by  the  statutes  is  that  found 
in  Section  18  of  Chapter  15,  page  112.  “The  Auditor  shall  make  out 
and  present  to  the  Governor,  at  least  ten  days  before  each  regular 
session  of  the  General  Assembly,  a report  showing  the  amount  of 
warrants  drawn  on  the  treasury,  to  whom  and  for  what  account  they 
were  drawn,  and  if  drawn  on  the  contingent  fund,  to  whom  and  for 
what  they  were  issued.  He  shall  also,  at  the  same  time,  report  to  the 
Governor  the  amount  of  money  received  into  the  treasury,  stating, 
particularly,  the  source  from  which  the  same  may  be  derived,  and  also 
a general  account  of  all  the  business  of  his  office.” 

State  Treasurer. 


The  most  important  duty  of  the  State  Treasurer  is  that  specified 

in  Section  7 of  Chapter  130:  “The  State  Treasurer  shall  receive  the 

revenues  and  all  other  public  moneys  of  the  State,  and  all  moneys 

authorized  by  law  to  be  paid  to  him,  and  safely  keep  the  same.”  In 

Section  22  of  Chapter  130,  approved  March  7,  1908,  it  is  the  duty  of 
the  State  Treasurer  to  “deposit  all  moneys  received  by  him  on  account 
of  the  State  within  five  days  after  receiving  same  in  such  banks  in 
the  cities  of  the  State  as  in  the  opinion  of  the  Treasurer  are  secure 
and  which  shall  pay  the  highest  rate  of  interest  to  the  State  for  such 
deposits.  The  money  so  deposited  shall  be  placed  to  the  account  of 
the  State  Treasurer.”  In  addition  to  taxes,  it  is  provided  in  Section  11 
of  Chapter  102  that  certain  specified  officers  and  departments  are  to 
deposit  into  the  State  Treasury  all  revenues  that  they  collect.  In  Sec- 
tion 12  of  the  same  chapter,  it  is  provided  that  all  such  officers  and 
departments  are  “to  keep  in  proper  books  a detailed  itemized  account 


of  all  moneys  received  and  from  what  source,  or  sources,  received, 
and  are  to  report  such  receipts  under  oath 'to  the  Auditor  of  Public 
Accounts  at  the  end  of  each  calendar  quarter.  The  departments 
specified  seem  to  include  all  State  departments  and  institutions  with 
the  exception  of  the  State  Board  of  Agriculture,  the  State  University, 
and  the  State  Normal  Schools. 

In  Section  24  of  Chapter  130,  it  is  specifically  stated  that  the  State 
Treasurer  is  “personally  responsible  for  the  faithful  performance  of 


16 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


his  duties  under  the  law  and  for  a proper  accounting  of  all  moneys 
paid  to  him  as  State  Treasuiter.’’  It  appears,  therefore,  that  it  is  the 
duty  of  the  State  Treasurer  to  safely  keep  the  moneys  of  the  State  by 
depositing  them  in  banks  that,  in  his  opinion,  are  secure.  He  is  re- 
quired to  select  banks  which  “pay  the  highest  rate  of  interest  to  the 
State  for  such  deposits.”  It  does  not  appear  that  the  State  Treasurer 
need  deposit  money  in  a bank  offering  a higher  rate  of  interest  than  the 
depositary  he  has  already  selected.  It  is  his  first  duty  to  safely  keep 
the  funds  and  his  second  duty  to  secure  as  much  interest  on  them  from 
banks  as  is  consistent  with  the  security  required. 

Section  12  of  Chapter  130  provides  that  the  State  Treasurer  “shall 
keep  regular  and  fair  accounts  of  all  moneys  received  and  paid  out  by 
him,  stating,  particularly,  on  what  account  each  amount  is  received 
or  paid  out.” 

The  State  Treasurer  has  no  responsibilities  as  to  the  auditing  of 
warrants  for  disbursements.  Under  Section  11  of  Chapter  130,  he  is 
required  to  countersign  any  warrant  that  is  presented  him  to  be 
countersigned,  and  tO'  keep  a record  of  it.  Auditing  protection  is 
afforded  in  the  requirement  of  Section  13  of  Chapter  130  that  warrants 
shall  be  cancelled  by  cutting  or  perforation  and  by  the  requirement  of 
Section  14  of  Chapter  130  that  the  Treasurer  shall  “at  the  close  of 
each  month,  report  to  the  Auditor  the  amount  of  money  received  and 
paid  out  by  him  during  the  month,  stating  on  what  account  the  same 
was  received  and  paid;  and  shall,  at  the  same  time,  deposit  with  the 
Auditor  all  warrants,  properly  cancelled,  which  he  may  have  paid,  and 
take  the  Auditor’s  receipt  for  the  same.” 

Section  10  of  Chapter  130  specifically  places  auditing  responsibility 
upon  the  Auditor  rather  than  upon  the  Treasurer,  by  providing  that 
“The  Treasurer  shall  not  pay  out  of  the  treasury  any  money,  except 
upon  the  warrant  of  the  Auditor.” 

The  Auditor  is  likewise  made  responsible  for  the  auditing  of  all 
receipts  of  the  State.  Section  8 of  Chapter  130  provides  that  the 
Treasurer  shall  be  removed  from  his  office  if  he  receives  money  into 
the  State  Treasury  otherwise  than  upon  an  order  from  the  Auditor. 
Section  9 of  Chapter  130  provides  that  the  Treasurer  shall  issue  dupli- 
cate receipts  to  persons  paying  money  into  the  treasury,  and  that  such 
receipts  shall  be  counter-signed  by  the  State  Auditor. 

Under  Section  7 of  Chapter  130,  the  Treasurer  is  to  receive  all 
revenues  of  the  State  as  well  as  all  moneys.  This  section  provides 
for  the  deposit  with  the  Treasurer  of  bonds  and  other  credits  owned 
by  the  State.  As  an  auditing  protection,  it  is  provided  in  Section  17 
of  Chapter  130,  that  “every  United  States  or  other  bond  now  in  the 
State  treasury,  or  that  may  hereafter  come  into  the  treasury,  shall 
immediately  be  indorsed  with  the  words  following,  viz:  ‘Property  of 
the  State  of  Illinois,  not  transferable  by  the  Treasurer,  without  the 
consent  of  the  Governor  indorsed  thereon.’  ” 

It  will  be  noted  that  the  statutes  provide  rather  complete  auditing 
protection  so  far  as  the  receipt  and  disbursement  of  money  is  con- 
cerned, and  so  far  as  the  deposit  of  bonds  and  other  credit  papers  is 
concerned.  It  is  to  be  especially  noted  that  bonds  owned  by  the  State 


REPORT  ON  ACCOUNTS. 


1/ 


and  deposited  with  the  Treasurer  are  transferable  only  upon  the  en- 
dorsement of  the  Governor.  In  this  case,  the  Governor  is  made  the 
auditing  officer  rather  than  the  Auditor  of  Public  Accounts. 

As  Treasurer,  the  Treasurer  is  not  required  by  the  statutes  to  pro- 
tect the  State  in  the  disbursement  of  public  credit.  This  auditing  duty 
devolves  upon  a board  composed  of  the  Governor,  Auditor,  and  Treas- 
urer. (Section  389  of  Chapter  120.) 

To  insure  the  fulfillment  by  the  State  Treasurer  of  his  duties,  he 
is  required  to  take  an  oath  upon  assuming  office  and  to  deposit  a bond 
in  the  penal  sum  of  five  hundred  thousand  dollars,  conditioned  for  the 
faithful  discharge  of  his  duties.  This  bond  is  to“  be  approved  by  the 
Governor  and  two  justices  of  the  Supreme  Court.  The  Governor  may 
require  additional  bonds.  (Section  1 and  3 of  Chapter  130.)  The 
Treasurer  is  allowed  the  sum  of  five  thousand  dollars  from  the  State 
treasury  as  payment  on  the  premiums  on  the  bonds  given  by  him  as 
Treasurer.  (Section  23  of  Chapter  130.)  Under  Section  6 of  Chapter 
130,  the  Governor  is  authorized  to  institute  suits  under  the  bond 
either  against  the  Treasurer  or  against' his  sureties,  without  first  ob- 
taining judgment  against  the  Treasurer.  As  a protection,  it  is  re- 
quired that  the  bond  of  the  Treasurer  shall  be  filed  in  the  office  of 
the  Secretary  of  State.  (Section  1 of  Chapter  130.) 

An  important  protection  afforded  by  the  statutes  is  that  found  in 
Section  1 of  Chapter  130,  requiring  the  Treasurer  '‘to  deliver  up  all 
moneys,  papers,  books,  records  and  other  property  appertaining  to  his 
office,  whole,  safe,  and  undefaced  to  his  successor  in  office.”  One  of 
the  chief  protections  to  the  public  as  to  the  discharge  by  the  Treasurer 
of  his  duties  is  found  in  the  requirement  of  a biennial  report.  “He 
shall  also  make  out  and  present  to  the  Governor,  at  least  ten  days 
before  each  regular  session  of  the  General  Assembly,  a full  report  of 
all  moneys  by  him  received  and  paid  out,  and  also  a general  account 
of  all  the  business  of  his  office.”  (Section  15  of  Chapter  130.) 


Auditing  and  Accounting  Other  Than  By  Auditor  and  Treasurer. 

Practically  all  of  the  statutes  quoted  heretofore  were  first  passed 
in  1845  under  the  Constitution  of  1818,  the  first  Constitution  of  the 
State.  These  statutes  have  not  since  been  changed.  The  Constitutional 
provisions  and  the  statutes  heretofore  referred  to  seem  to  contemplate^ 
that  the  auditing  and  accounting  responsibilities  shall  be  centered  in 
the  office  of  the  State  Auditor  of  Public  Accounts.  The  General 
Assembly  has,  however,  provided  special  auditing  and  accounting 
agencies  for  numerous  classes  of  transactions.  We  have  already  noted 
that  the  Governor  is  an  auditing  officer  with  respect  to  the  bonds  of 
the  State  Auditor  and  the  State  Treasurer,  and  also  with  respect  to 
the  transfer  by  endorsement  of  bonds  and  other  securities  owned  by 
the  State.  Other  auditing  and  accounting  duties  have  been  laid  by 
the  General  Assembly  upon  the  following  officers  and  departments: 

1.  Governor,  exercised  through  the  Institutional  and  Depart- 
mental Auditor. 


Secretary  of  State  and  State  Board  of  Contracts. 

Civil  Service  Commission. 


18 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


/ 4.  Board  of  Prison  Industries,  as  to  the  purchase  of  furniture 

\ and  other  supplies. 

^ 5.  State  Architect,  as  to  building  transactions. 

Auditing  Powers  of  Governor. 

The  auditing  powers  of  the  Auditor  of  Public  Accounts  have  been 
supplemented  in  the  case  of  most  of  the  appropriation  Acts  made  for 
the  support  of  the  executive  departments  by  the  requirement  that  the 
Governor  shall  approve  bills  for  traveling  expenses,  pay  rolls,  and, 
indeed,  all  bills  submitted  to  the  Auditor  as  charges  against  such  ap- 
propriations. (See  pages  119  and  120  of  the  session  laws  of  1913  for 
aii  example  of  the  tenor  of  such  appropriation  Act  provisions.)  To 
aid  the  Governor  in  this  particular,  the  position  of  Institutional  and 
Departmental  Auditor  has  been  created.  This  Institutional  Auditor 
has  no  authority  as  of  his  own  office,  but  acts  for  the  Governor. 

The  effect  of  this  requirement  of  appropriation  acts  that  the 
Governor  shall  approve  individual  bills  before  the  Auditor  of  Public 
Accounts  shall  pay  them  is  to  place  a very  considerable  auditing  power 
in  the  hands  of  the  Governor,  or  rather  in  the  hands  of  his  Institutional 
Auditor.  While,  in  point  of  law,  the  Auditor  of  Public  Accounts  still 
has  the  final  audit,  the  prestige  of  the  Governor’s  office  is  undoubtedly 
such  as  to  make  the  approval  of  the  Institutional  Auditor  in  the  name 
of  the  Governor  practically  a final  audit. 

Section  8 of  Chapter  102  of  the  Revised  Statutes  provides  that 
/'an  account  shall  be  kept  by  the  officers  of  the  Executive  department, 
/ and  of  all  the  public  institutions  of  the  State  of  all  money  received 
^ or  disbursed  by  them  severally  from  all  sources  and  for  every  service 
1 performed,  and  a semi-annual  report  thereof  be  made  to  the  ’Governor 
^^f  the  State  under  oath.”  This  semi-annual  report  must  be  made  in 
the  form  prescribed  by  the  Governor.  This  requirement  gives  the 
Governor  a very  real  power  in  the  prescription  of  accounting  systems 
for  executive  departments  and  institutions,  inasmuch  as  he  may  require 
a report  in  such  form  as  to  make  necessary  the  keeping  of  certain 
prescribed  accounts.  It  may  be  well  to  add  that  this  power  of  the 
Governor  has  never  be^n  exercised,  other  than  to  require  institutions 
to  report  in  detail  receipts  and  disbursements  classified  only  as  to  ap- 
propriation Acts. 

Auditing  Powers  of  Secretary  of  State  and  State  Board  of  Contracts. 

Under  Section  5 of  Chapter  124  of  the  Revised  Statutes,  the  Sec- 
retary of  State  is  given  control  over  the  office  space  in  the  State  Capitol 
Building,  over  the  furniture  in  the  State . House,  and  is  required  to 
furnish  office  supplies  to  his  own  office  and  to  the  Governor,  Treasurer, 
Auditor,  Superintendent  of  Public  Instruction,  and  Attorney  General. 
The  same  provision  is  applied  to  other  offices  by  the  statutes  creating 
them. 

It  has  been  customary  to  appropriate  a sum  of  money  to  the  Secre- 
tary of  State  out  of  which  supplies  are  purchased  for  the  use  of  the 
various  executive  departments.  It  has  been  customary  to  appropriate 
such  sums  to  the  Secretary  of  State  as  may  be  necessary  to  maintain 


REPORT  ON  ACCOUNTS. 


1) 


the  State  House  and  to  keep  it  lighted  and  heated.  (See  paragraph 
8 on  page  97  of  the  session  laws  of  1913  for  example  of  such  an  appro- 
priation.) 

The  actual  purchase  of  stationery  and  printing  is  done  by  the 
Secretary  of  State,  under  contracts  awarded  by  a commission  on  State 
contracts,  composed  of  the  Attorney  General,  Secretary  of  State,  State 
Treasurer,  and  the  Auditor  of  Public  Accounts.  (Chapter  127,  Re- 
vised Statutes.)  To  aid  this  Commission  on  Contracts  in  the  handling 
of  State  printing,  an  officer  is  appointed,  known  as  Printer  Expert. 
(Section  21  of  Chapter  127.)  The  Printer  Expert  is  presumed  to 
enforce  the  contracts  of  the  Commission  on  Contracts.  The  Printer 
Expert  is  supervised  by  the  Secretary  of  State  (Section  22  of  Chapter 
127),  and  is  required  to  audit  all  printing  bills.  (Section  23  of  Chap- 
ter 127.) 

It  will  be  seen  that  the  Secretary  of  State  has  a considerable  audit- 
ing power,  using  the  term  in  a broad  sense,  in  the  service  that  he  is 
required  to  perform  for  other  State  officers.  The  Secretary  of  State, 
thrbugh  the  Printer  Expert,  has  practically  final  auditing  power,  in  so 
far  as  paying  of  bills  for  State  printing  is  concerned.  To  be  sure, 
Section  23  of  Chapter  127  provides  that  a contractor  for  State  printing 
may  carry  a bill,  disapproved  by  the  Printer  Expert,  to  the  Commission 
on  Contracts,  and  that  the  Commission  on  Contracts  shall  have  final 
power  to  adjudicate  such  a disputed  bill.  In  this  limited  number  of 
cases,  the  Auditor  of  Public  Accounts  has  some  direct  auditing  power 
over  printing  bills,  in  so  far  as  he  is  ex  officio  a member  of  the  Com- 
mission on  Contracts.  For  all  practical  purposes,  it  may  be  said  that 
the  Printer  Expert  is  the  auditor  of  State  printing  bills.  The  appror 
priation  made  in  1913  for  State  printing  and  binding  (including  paper 
and  the  State  Blue  Book)  amounted  in  all  to  $347,300.  (See  Sections 
15,  16  and  17  on  page  98  of  the  session  laws  of  1913.) 

Auditing  Powers  of  the  Civil  Service  Commission. 

Under  Chapter  24a  of  the  Revised  Statutes,  the  Civil  Service 
Commission  is  given  very  large  auditing  powers  over  the  employment 
of  servants  of  the  State.  Under  Section  11  of  Chapter  24a  this  power 
of  the  Civil  Service  Commission  extends  to  all  persons  on  the  pay  roll 
of  the  State  excepting  elective  officers ; officers,  boards  and  commis- 
sions appointed  by  the  Governor  subject  to  confirmation  by  the  Senate ; 
officers  and  employees  of  the  Legislature;  judges  and  officers  of  the 
court;  employees  of  the  State  military  service:  instructional  staff  of 
the  State  University  and  Normal  Schools;  employees  at  the  executive 
mansion ; attorneys ; building  and  loan  and  bank  examiners ; officers 
of  charitable,  correctional  and  penal  institutions ; one  private  secretary 
or  stenographer  in  the  elective  offices  and  offices  of  the  president,  dean 
of  men  and  dean  of  women  of  the  University  of  Illinois,  and  in  the 
offices  of  the  presidents  of  the  Normal  schools;  all  clerks  and  watch- 
men in  the  offices  of  elective  officers ; and  students  at  the  University 
of  Illinois  and  the  Normal  Schools.  While  the  exemptions  to  Civil 
Service  requirements  appear  to  be  numerous  in  effect  a very  large  per 
cent  of  the  employees  of  the  State  are  in  the  classified  service  and  hence 
subject  to  the  auditing  power  of  the  Civil  Service  Commission. 


20 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


Under  Sections  27  to  31  inclusive,  of  Chapter  24a,  it  is  provided 
that  the  State  Auditor  and  the  State  Treasurer  shall  pay  salaries  for 
the  services  of  "any  person  employed  in  the  classified  service  of  the  State 
only  upon  certification  by  the  Civil  Service  Commission  that  the  em- 
ployees named  “have  been  appointed,  or  employed,  or  promoted  in 
pursuance  of  law  and  of  the  rules  made  in  pursuance  of  this  Act.” 

It  is  interesting  to  note  that  under  the  caption  of  “Auditing 
Officer,”  Section  27  of  Chapter  24a  provides  that  the  Governor  shall 
not  approve  any  voucher  for  any  claim  of  any  public  officer  for  the 
services  of  any  person  employed  in  the  classified  service  of  the  State 
in  violation  of  the  provisions  of  this  Act.”  This  Section  27  is  a frank 
statement  of  the  auditing  powers  of  the  Governor. 

Auditing  Powers  of  the  Board  of  Prison  Industries, 

Under  Sections  75  to  102  of  Chapter  108  of  the  Revised  Statutes, 
the  Commissioners  of  the  Illinois  State  Penitentiary  at  Joliet,  the 
Commissioners  of  the  Southern  Illinois  Penitentiary  at  Chester,  and  the 
Board  of  Managers  of  the  Illinois  State  Reformatory  at  Pontiac  are 
created  a Board  of  Prison  Industries.  This  board  is  given  very  sweep- 
ing powers  to  manufacture  by  convict  labor  in  the  penitentiaries  and 
reformatories  all  articles  that  may  be  required  for  State  use.  State 
officers  and  State  institutions  are  required  to  purchase  such  articles 
from  the  Board  of  Prison  Industries  as  the  Board  of  Prison  Industries 
may  cause  to  be  manufactured  and  offered  for  sale.  “No  articles  so 
manufactured  shall  be  purchased  from  any  other  source  for  the  State 
or  public  institutions  of  the  State,  unless  said  Board  of  Prison  Indus- 
tries of  Illinois  shall  certify  that  the  same  cannot  be  furnished.  . . . 

and  no  claim  therefore  shall  be  audited  or  paid  without  such  certificate.” 

It  will  be  seen  that  the  Auditor  of  Public  Accounts  is  not  author- 
ized to  draw  his  warrant  in  payment  for  supplies  purchased  from  com- 
mercial vendors,  if  it  shall  appear  that  such  supplies  are  manufactured 
and  sold  by  the  Board  of  Prison  Industries,  and  if  it  shall  appear  that 
the  Board  of  Prison  Industries  has  not  certified  that  the  particular  sup- 
plies, covered  by  the  bill  for  which  the  warrant  is  drawn,  cannot  be 
furnished  from  the  prison  industries. 

The  President  of  the  Board  of  Prison  Industries  of  Illinois,  the 
President  of  the  State  Board  of  Administration  and  the  Auditor  of 
Public  Accounts  of  Illinois  are  created  a Board  of  Classification  under 
Section  90  of  Chapter  108,  and,  as  such,  are  required  to  fix  the  prices 
for  all  products  furnished  to  State  departments  and  institutions  by  the 
Board  of  Prison  Industries. 

It  will  be  seen  that  the  Board  of  Prison  Industries  and,  particu- 
larly, the  Board  of  Classification  have  a very  considerable  financial 
control  over  State  departments  and  institutions  in  that  such  depart- 
ments must  buy  supplies  from  the  Board  of  Prison  Industries  at  the 
prices  fixed  by  the  Board  of  Classification.  The  only  share  of  the 
Auditor  of  Public  Accounts  in  this  financial  control  comes  in  the  fact 
that  he  is  ex  officio  a member  of  the  Board  of  Classification,  and  that, 
under  Section  90  of  Chapter  108,  he  is  required  to  devise  and  furnish 
a proper  system  of  accounts  for  the  transactions  of  the  Board  of 
Prison  Industries. 


REPORT  ON  ACCOUNTS. 


21 


Auditing  Powers  of  the  State  Architect. 

Under  Sections  13  to  17  inclusive,  of  Chapter  10a  of  the  Revised 
Statutes,  the  Governor  is  empowered  to  appoint  a State  Architect  of 
Public  Buildings  and  Improvements.  All  State  departments  and  in- 
stitutions are  required  to  avail  themselves  of  the  services  of  the  State 
Architect  in  the  preparation  of  plans  for  new  buildings  and  in  the 
supervision  of  the  construction  of  all  public  buildings  and  works.  For 
this  service,  the  departments  and  institutions  are  required  to  pay  to  the 
State  Architect  a commission  of  two  and  one-half  per  cent  of  the  cost 
of  the  work. 

Nothing  is  said  in  the  sections  creating  the  office  of  State  Architect 
and  defining  the  duties  of  that  officer  as  to  his  auditing  powers.  It  is 
the  evident  intent  of  the  law,  Jiowever,  that  the  State  Architect  shall 
be  responsible  for  the  honesty  and  efficiency  of  the  plans  and  the  con- 
struction work  on  public  buildings.  While  the  Auditor  of  Public  Ac- 
counts remains  the  financial  auditor  in  connection  with  the  payment 
of  bills  on  account  of  the  construction  of  public  buildings,  it  would 
seem  that  the  State  Architect  bears  the  responsibility  as  to  the  actual 
worth  of  the  materials  and  services  represented  by  such  bills. 

The  Court  of  Claims. 

All  claims  disputed  by  the  officers  in  charge  of  executive  depart- 
ments and  State  institutions,  or  disallowed  by  the  State  Auditor  may 
be  brought  for  final  adjudication  before  a Court  of  Claims  created  by 
Sections  331  to  341  inclusive,  of  Chapter  37  of  the  Revised  Statutes. 
This  Court  of  Claims  consists  of  three  judges  appointed  by  the  Gov- 
ernor. The  Auditor  of  Public  Accounts  is  ex  officio  clerk  of  this  court. 
Qaims  allowed  by  the  Court  are  reported  by  the  Auditor  to  the  Gov- 
ernor, and  by  the  Governor  to  the  General  Assembly.  The  General 
Assembly  may  or  may  not  make  appropriations  covering  such  adjudica- 
tions. The  action  of  the  Court  of  Claims  is  final  so  far  as  the  claimant 
is  concerned. 

A bill  disallowed  by  the  State  Auditor  may,  therefore,  be  brought 
before  the  Court  of  Claims  and  the  Court  of  Claims  by  adjudication 
may  bring  the  bill  with  their  endorsement  to  the  General  Assembly 
The  supreme  and  final  auditing  power  in  the  State,  therefore,  re.<tsA 
with  the  Legislature.  For  all  practical  purposes,  the  Auditor  of  Public 
Accounts  may  be  considered  as  the  final  auditor.  Bills  disallowed  by 
him,  because  of  their  illegitimate  or  illegal  character,  will  seldom  be 
revised  before  a Court  of  Claims-  of  which  the  Auditor  is  ex  officio 
clerk.  The  legislative  intent  in  creating  the  Court  of  Claims  seems  to 
have  been  the  provision  of  a judicial  body’  for  the  settlement  of  ex- 
traordinary claims,  such  as  claims  for  personal  injuries  alleged  to  have 
been  received  in  the  public  service  of  the  State.  « 

D.  ACCOUNTS  AND  ACCOUNTING  PROCEDURE  IN  THE  OFFICE  OF  THE 

STATE  AUDITOR. 

1.  Revenue  Procedure  and  Auditing. 

The  Auditor  of  Public  Accounts  and  the  State  Board  of  Equaliza- 
tion, of  which  the  Auditor  is  usually  chairman,  maintain  a compre- 


22  EFFICIENCY  AND  ECONOMY  COMMITTEE. 

hensive  procedure  in  the  determination  of  valuations  for  the  purpose 
of  State  taxation.  A description  of  that  procedure  is  not  given  here. 

Accounting  for  the  Collection  of  State  Taxes. 

The  county  clerk  of  each  county  in  the  State  is  required  to  make 
an  annual  report  of  the  total  valuation  of  property  listed  for  taxation 
in  his  county,  and  of  the  taxes  charged  thereon,  including  taxes  due  for 
previous  years.  The  form  of  this  report  is  prescribed  by  the  State 
Auditor.  (See  form  1.)^  This  statement  of  valuation  and  taxes  is 
made  up  by  the  county  clerk  from  the  report  of  equalized  valuation 
made  out  by  the  State  Board  of  Equalization.  The  report  of  the. State 
Board  of  Equalization  is  based  upon  the  local  assessments  as  corrected 
by  the  County  Board  of  Review.  The  amount  due  from  the  county  on 
taxes  is  computed  by  the  county  clerk  by  applying  the  State  rates 
fixed  by  the  Board  of  Equalization  to  the  valuations  agreed  upon  by 
the  State  Board  of  Equalization.  The  county  clerk  is  notified  of 
the  rate  of  taxatibn  on  account  of  general  State  purposes,  State  school 
purposes,  and  the  University  of  Illinois  Mill  Tax  Fund,  by  a circular 
letter  sent  out  by  the  State  Auditor.  (See  form  2.) 

The  valuation  and  taxes  reported  by  county  clerks  are  entered  by 
the  revenue  clerk  in  the  office  of  the  State  Auditor  in  a bound  book 
entitled  ‘‘revenue  book  by  collectors  of  counties.”  This  book  has  the 
following  columns ; 

1.  Date 

2.  Item 

j.  Valuation 

4.  Revenue 

5.  School 

6.  University 

7.  Total 

The  “revenue  book”  has  the  same  columns  on  both  the  debit  and  credit 
sides. 

When  taxes  have  been  received  by  the  county  treasurer  (who  is 
ex  officio  county  collector),  they  are  paid  into  the  county  treasury  and 
the  county  treasurer  comes  to  the  office  of  the  State  Auditor  in  person 
for  the  purpose  of  making  tax  settlement.  The  county  treasurer  brings 
.with  him  a statement  of  the  account  of  the  county  collector.  (See 
form  3.)  This  statement  on  the  debit  side  gives  the  same  information 
as  to  taxes  receivable  as  is  contained  in  the  report  of  the  county  clerk 
■ shown  in  form  1,  and  as  has  been  posted  in  the  debit  side  of  the  account 
of  the  county  in  the  “revenue  book.”  The  county  collector’s  statement 
shows  on  the  credit  side  the  taxes  collected  and  paid  into  the  county 
treasury.  After  the  information  given  in  form  3 by  the  county  col- 
lector has  been  compared  with  the  information  given  in  form  1 by  the 
county  clerk,  a settlement  is  made  and  the  revenue  clerk  in  the  office 
of  the  State  Auditor  makes  out  an  order  directing  the  State  Treasurer 
to  receive  the  tax  moneys  from  the  county  collector.  (See  form  4.) 
From  this  order  and  from  the  settlement  made  as  shown  on  form  3 as 
to  errors  on  real  property,  insolvencies  and  removals  on  personal  prop; 


2Form  numbers  are  those  of  the  writer. 


REPORT  ON  ACCOUNTS. 


23 


erty,  collector’s  commission,  and  collector’s  mileage,  items  are  credited 
by  the  revenue  clerk  on  the  credit  side  of  the  account  maintained  as 
to  each  county  collector  in  the  “revenue  book.” 

It  will  be  seen  that  the  “revenue  book”  shows  on  the  debit  side 
the  assessed  taxes  charged  to  the  county  collector,  and  shows  oi4  the 
credit  side^the  manner  in  which  the  county  collector  has  met  this  re- 
sponsibility, either  by  handing  over  cash,  or  by  a statement  of  errors, 
insolvencies,  taxes  in  arrears,  commissions,  and  mileage.  The  “revenue 
book”  is,  therefore,  of  great  importance.  It  will  be  seen  later  that  it 
is  possible  to  audit  the  “revenue  book”  by  comparing  postings  made  to 
the  account  with  a county  collector  with  the  account  kept  for  the  county 
in  the  “revenue  ledger”. 

Accounting  for  the  Collection  of  Inheritance  Taxes. 

Inheritance  taxes  are  collected  by  county  treasurers  and  are  paid 
by  them  into  the  State  treasury  through  the  office  of  the  State  Auditor. 
The  county  treasurer  is  required  to  turn  over  the  full  amount  collected 
to  the  State  Treasurer,  less  appraiser’s  fees,  fees  of  county  clerks,  and 
such  other  expenses  as  may  be  certified  to  as  reasonable  by  the  county 
judge. 

On  the  1st  Monday  of  March  and  of  September  of  each  year,  the 
treasurer  of  each  county  is  required  to  report  under  oath  the  amount 
of  inheritance  tax  collections.  (See  form  5.)  The  money  collected 
must  be  turned  over,  however,  as  soon  as  it  is  received  by  the  county 
treasurer.  The  duplicate  of  the  tax  receipt  issued  by  the  county  treas- 
urer must  be  counter-signed  by  the  State  Treasurer.  (See  form  6.) 

When  the  county  treasurer  turns  over  taxes  collected  under  the 
Inheritance  Tax  Law,  an  order  is  made  out  by  the  revenue  -clerk  in 
the  office  of  the  State  Auditor  directing  the  State  Treasurer  to  receive 
the  money.  This  order  is  posted  by  the  revenue  clerk  to  a book  en- 
titled “account  of  receipts  into  the  treasury”  and  from  there  to  a 
“revenue  ledger.” 

Collection  of  Revenue  Other  Than  from  Taxes. 

Revenue  is  paid  into  the  State  treasury  through  the  office  of  the 
State  Auditor  on  account  of  license  fees,  receipts  from  the  sale  of 
public  property,  and  miscellaneous  receipts.  Such  moneys  usually 
come  to  the  office  of  the  State  Auditor  or  to  the  office  of  the  State 
Treasurer,  accompanied  by  a voucher  of  the  department  making  the 
collection.  These  vouchers  vary  in  form  according  to  the  nature  of 
the  receipts  transmitted.  The  revenue  voucher  forms  used  for  mis- 
cellaneous purposes  are  designed  by  the  departments  making  the  col- 
lections, and  sometimes  consist  only  of  typewritten  letters  referring 
to  a draft  enclosed  and  the  character  of  revenue  that  the  draft  covers. 
Under  strict  legal  procedure,  all  such  revenue  should  come  directly  to 
the  State  Auditor.  Some  of  them,  however,  are  mailed  to  the  office 
of  the  State  Treasurer.  In  either  case,  the  State  Auditor  makes  an 
order  upon  the  State  Treasurer  directing  him  to  receive  such  revenue 
and  credit  it  to  the  revenue  fund  of  the  State.  (See  form  7.) 
'‘Receipt  Book”  and  "Receipt  Ledger.” 

All  moneys  are  received  into  the  State  treasury  on  orders  signed 
by  the  Auditor  of  Public  Accounts.  These  orders  are  issued  in  dupli- 


24 


EFFICIENCY  AND  ECONOMY  COMMITTER 


cate,  and  from  the  duplicates  the  revenue  clerk  in  the  office  of  the 
State  Auditor  posts  to  a book  entitled  “account  of  receipts  into  State 
treasury.’’  This  book  has  the  following  columns; 

1.  Date. 

2.  Number  (of  order). 

.3.  From  whom.  ^ v 

4.  County. 

5.  Years  tax. 

6.  Ledger  page. 

7.  From  what  bond  fund. 

8.  Revenue. 

9.  School. 

10.  University. 

11.  Special. 

12.  Sinking  fund. 

13.  Local  bond  funds. 

14.  Total. 

The  entries  in  the  “receipt  book”  are  chronological  entries,  i.  e., 
entries  are  made  according  to  the  consecutive  numbers  on  receipt 
orders.  The  total  in  the  “total”  column  for  any  day,  week  or  month 
should  show  the  receipts  into  the  State  treasury  for  that  day,  week  or 
month.  The  total  of  the  columns  headed  “revenue,”  “school,”  and 
“university”  should  agree  with  the  total  of  the  credit  columns  simi- 
larly headed  in  the  “revenue  book  by  collectors  of  counties.”  It  will 
be  remembered  that  the  “revenue  book  by  collectors  of  counties”  con- 
tains an  account  for  the  collector  of  each  county.  By  taking  a trial 
balance  ♦of  the  “revenue,”  “school”  and  “university”  credits  in  the 
accounts  in  the' “revenue  book,”  it  should  be  possible  for  an  expert  book- 
keeper to  get  the  same  totals  as  appear  in  the  “revenue,”  “school,”  and 
“university”  columns  in  the  book  entitled  “account  of  receipts  into  State 
treasury.”  While  this  would  be  a laborious  process,  it  is  mentioned 
here  to  show  the  adequacy  of  the  present  records  from  the  bookkeeping 
standpoint. 

Each  order  is  posted  into  the  book  entitled  “account  of  receipts 
into  State  treasury.”  The  entries  there  are  posted  into  “revenue 
ledgers.”  All  the  entries  *are  posted  into  a cash  account  and  then  are 
posted  a second  time  into  accounts  with  each  fund.  The  total  of  the 
postings  into  fund  accounts  will  equal,  of  course,  the  total  of  the  post- 
ings into  the  cash  account. 

Auditing  of  Receipts. 

The  procedure  described  provides  for  an  audit  of  receipts  derived 
Equalization. 

Receipts  derived  from  inheritance  taxes  are  audited  so  as  to  strike 
out  any  deductions  on  account  of  the  expenses  of  the  county  treasurer 
as  the  collector  of  such  inheritance  taxes  not  specifically  allowed  by  the 
provisions  of  the  Inheritance  Tax  Law. 

It  must  be  admitted  that  the  procedure  described  does  not  provide 
in  itself  an  adequate  auditing  machinery  as  to  the  moneys  collected 
by  various  State  departments  and  institutions  on  account  of  licenses, 


REPORT  ON  ACCOUNTS. 


25 


fines,  fees,  departmental  sales,  and  the  like.  The  Legislature  of  1913, 
however,  provided  a special  appropriation  of  ten  thousand  dollars 
($10,000)  for  the  State  Auditor  to  enable  him  to  employ  professional 
accountants  to  audit  the  original  records  in  the  various  fee  collecting 
offices  of  the  State. 

Cash  Audits, 

The  Accounts  of  the  State  Auditor  are  periodically  reconciled  with 
the  accounts  of  the  State  Treasurer.  This  reconciliation  affords  a 
rather  complete  check  on  the  actual  cash  receipts  and  disbursements 
of  the  State  Treasurer.  The  procedure  will  be  described  in  connection 
with  the  accounting  procedure  of  the  office  of  the  State  Treasurer. 

2.  Disbursement  Procedure  and  Auditing. 

The  appropriation  laws  passed  by  the  General  Assembly  com- 
monly provide  that  the  State  Auditor  shall  draw  his  warrant  upon  the 
State  Treasurer  in  the  payment  of  bills  incurred  by  the  various  execu- 
tive officers,  State  departments  and  State  institutions,  upon  receipt  and 
audit  by  the  State  Auditor  of  vouchers  certified  to  as  correct  by  the 
executive  officers,  heads  of  the  State  departments,  or  officers  of  the 
State  institutions. 

The  first  step,  then,  in  the  payment  of  money  from  the  State 
treasury  is  taken  in  the  office  of  the  department  that  has  incurred  the 
expense  that  is  to  be  paid.  The  officer  in  charge  of  the  department,  or 
officer  of  the  board  of  trustees  in  charge  of  an  institution,  prepares  a 
voucher  showing  the  items  to  be  paid  in  detail  and  certify  to  these 
items  as  correct.  The  various  State  officers,  department  heads,  and 
institutional  officers  have  devised  forms  of  vouchers  that  in  their 
opinions  are  suitable  for  their  several  interests.  These  vouchers  are 
not  uniform  in  size  or  character,  and  there  appears  to  be  no  uniformity 
in  the  detail  that  the  vouchers  bear.  The  vouchers  used  by  the  Board  of 
Trustees  of  the  University  of  Illinois,  samples  of  which  are  submitted 
herewith,  will  serve  to  illustrate  the  form  in  which  bills  commonly 
come  to  the  attention  of  the  office  of  the  State  Auditor. 

All  vouchers  are  received  by  the  chief  warrant  clerk  or  the  assistant 
chief  warrant  clerk,  who  audits  the  vouchers  to  make  certain  that  they 
bear  the  signatures  of  officers  as  required  in  appropriation  Acts,  and 
that ‘the  itemized  accounts  upon  these  present  legitimate  charges  in 
proper  form.  It  devolves  upon  these  warrant  clerks  to  see  that  each 
voucher  is  charged  against  a proper  appropriation,  and  that  no  voucher 
is  passed  against  an  appropriation  in  excess  of  the  amount  appropriated. 
The  warrant  clerks  obtain  this  information  by  inspection  of  the  appro- 
priation ledger,  or  warrant  ledger,  which  will  be  described  later. 

If  all  the  requirements  are  complied  with,  the  vouchers  are 
stamped  as  being  filed  in  the  office  of  the  Auditor  of  Public  Accounts 
as  of  that  date,  and  the  vouchers  are  then  distributed  among  the  warrant 
clerks,  who  proceed  to  draw  warrants  in  payment  of  the  vouchers. 

If  there  are  a number  of  vouchers  chargeable  to  the  same  appro- 
priation, or  to  the  appropriations  made  by  the  General  Assembly  to  the 
same  department  or  institution,  they  are  compiled  on  a “list  of  war- 
rants” form.  (See  form  8.)  This  form  shows  the  number  of  the 


26 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


warrant,  to  whom  issued,  the  amount  of  the  warrant,  and  to  whom  the 
warrant  is  to  be  mailed.  At  the  top  of  the  form  the  total  amount  of 
the  vouchers  listed  is  distributed  as  a charge  against  one  or  more 
appropriations.  The  vouchers  and  warrants,  together  with  the  lists,- 
are  then  turned  over  to  one  of  the  warrant  clerks,  who  numbers  each 
voucher  and  the  warrant  made  out  for  its  payment  with  the  same 
number.  The  warrant  is  then  entered  in  a book  known  as  the  “entry 
clerk’s  record  book.”  This  book  shows  a chronological  record  of 
warrants  issued,  the  amount  of  the  warrant,  and  the  appropriation 
against  which  it  is  to  be  charged.  The  “entry  clerk’s  record  book”  is 
later  used  as  a posting  medium  for  the  “warrant  ledger,”  the  appropria- 
tion ledger. 

The  warrants  and  vouchers  are  then  handed  to  the  “journal  clerk,” 
who  makes  a full  record  of  the  warrant  on  a form  known  as  “warrant 
journal.”  (See  form  9.)  This  form  has  the  following  columns: 

1.  Ledger  page. 

2.  Date. 

3.  Number  of  warrant. 

4.  To  whom  issued. 

5.  For  what  issued. 

6.  Appropriation  purpose. 

7.  Appropriation  amount. 

8.  Total. 

9.  Received,  or  mailed  to. 

This  “warrant  journal”  is  the  official  posting  medium  for  the  appro- 
priation ledger.  Where  warrants  are  handed  out  over  the  counter  to 
clalimants,;  they  are  required  to  receipt  for  the  warrant  in  the  column 
provided  for  that  purpose.  Nearly  all  warrants  are  mailed,  however, 
and  the  place  to  which  the  warrant  is  mailed  is  indicated  in  the  column 
so  headed. 

The  journal  clerk  makes  a comparison  of  voucher  and  warrant  to 
make  sure  that  the  correct  number  appears  on  each.  The  vouchers 
are  then  folded  and  backed  and  are  filed  in  the  vault  consecutively  by 
numbers  in  document  files.  This  inconvenient  method  of  filing  seems 
to  be  made  necessary  by  the  various  sizes  of  vouchers  used  by  various 
departments  and  institutions.  After  the  warrants  and  vouchers  have 
been  compared,  the  warrants  are  sent  to  the  State  Treasurer  to  be 
counter-signed. 

The  State  Treasurer  countersigns  the  warrants  and  registers  them. 
They  are  then  returned  by  the  State  Treasurer  to  the  office  of  the 
State  Auditor.  The  journal  clerk  sorts  out  such  warrants  as  are  to  be 
handled  over  the  counter  and  places  them  in  a box  properly  indexed  for 
prompt  distribution.  The  vouchers  to  be  mailed  ouf  are  turned  over  to 
the  mail  clerk,  who  mails  them  in  envelopes  that^have  been  addressed 
by  the  warrant  clerks  at  the  same  time  that  the  warrants  were  type- 
written. 

Appropriation  Ledgers. 

The  “warrant  journal”  and  the  “entry  clerk’s  record  book”  give 
practically  the  same  information  and  are  used  in  making  charges 


REPORT  ON  ACCOUNTS. 


27 


against  various  funds  in  the  appropriation  ledger.  In  the  appropria- 
tion ledger,  an  account  is  kept  with  each  appropriation  made  by  the 
General  Assembly.  The  appropriation  ledger  is  known  as  the  “warrant 
ledger”  and  has  the  following  columns : 


1. 

2. 

3. 

4. 

5 to  17,  inclusive. 

18. 


Date. 

Number  of  warrant. 

To  whom  issued. 

For  what  issued. 
Appropriation  columns. 
Total. 


Three  appropriation  ledgers  are  maintained.  One  appropriation  ledger 
contains  only  the  accounts  administered  by  the  State  Board  of  Admin- 
istration. 

It  will  be  noted  that  thirteen  (13)  appropriation  columns  are 
provided  in  the  appropriation  ledger  (“warrant  ledger”).  These 
columns  make  it  possible  to  keep  all  of  the  appropriation  accounts  with 
one  institution  or  department  on  one  double  page,  since  it  seldom 
occurs  that  a single  department -or  institution  has  more  than  thirteen 
appropriations. 

At  the  beginning  of  each  year,  the  amounts  of  appropriations  are 
entered  at  the  head  of  appropriation  columns.  Balances  are  obtained 
from  time  to  time  by  subtracting  the  total  of  charges  made  against  an 
appropriation  from  the  amount  of  the  appropriation.  Such  balances 
are  frequently  indicated  in  red  ink.  If  any  balance  remains  unspent  at 
the  end  of  the  first  quarter  following  the  adjournment  of  the  next 
General  Assembly  after  that  of  the  General  Assembly  making  the 
appropriation,  such  balances  are  “lapsed”  by  red  ink  entries  indicating 
the  expiration  of  the  appropriation  period. 


Auditing  of  Disbursements. 


The  first  auditing  officers  with  respect  to  disbursements  are  the 
officers  in  charge  of  executive  departments,  or  of  institutions,  whose 
duty  it  is  to  certify  vouchers  to  the  State  Auditor  for  payment.  While 
this  certification  may  be  considered  to  be  an  administrative  a,ct  rather 
than  an  audit,  there  is  much  evidence  to  show  that  the  officers  in  charge 
of  the  larger  departments  and  institutions  audit  bills  carefully.  These 
officers,  in  fact,  are  the  only  officers  who  can  certifv  as  to  the  quantity 
and  quality  of  the  materials  received,  and  the  length  and  quality  of  the 
services  rendered. 

Bills  and  pay  rolls  coming  from  the  executive  departments  of  the 
State  are  audited  in  the  office  of  the  Governor  by  the  institutional 
auditor.  In  several  important  particulars,  the  institutional  auditor 
bears  the  same  auditing’ relationship  to  such  departments  as  that  of  the- 
Attorney  General,  as  does  the  fiscal  supervisor  of  the  Board  of  Admin- 
istration to  that  board,  and  the  comptroller  of  the  Board  of  Trustees 
of  the  University  to  the  University. 

. The  Auditor  of  Public  Accounts,  as  an  auditor  of  disbursements, 
is  concerned  primarily  with  the  auditing  of  bills  as  charges  against 
appropriations.  The  Auditor  of  Public  Accounts  may  be  said  to  be  the 
auditing  officer  whose  duty  it  is  to  enforce  the  intent  of  the  Legisla- 


28 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


ture  in  making  an  appropriation  for  a specific  purpose.  The  office  of 
the  Auditor  of  Public  Accounts  is  apparently  alive  to  its  responsibilities 
as  to  appropriation  charges,  and  the  procedure  in  the  office  of  the 
Auditor  of  Public  Accounts  is  adequate  to  protect  the  State  against 
misappropriation  of  funds. 

The  Auditor  of  Public  Accounts  has  a second  important  auditing 
function  in  the  reconciliation  that  is  made  betv^een  the  books  of  the 
State  Auditor  and  the  books  of  the  State  Treasurer.  It  is  the  duty  of 
the  Auditor  to  safeguard  the  State  with  respect  to  the  methods 
employed  in  the  payment  of  moneys.  From  examination  of  the  pro- 
cedure employed  in  the  office  of  the  Auditor  of  Public  Accounts,  it  is 
evident  that  a constant  audit  is  exercised  over  the  methods  employed  in 
paying  out  State  money. 

While  the  Auditor  of  Public  Acqounts  is  charged  by  law  with  the 
final  audit  of  disbursements  in  all  the  various  aspects  that  such  a final 
audit  may  assume,  the  practice  seems  to  be  for  the  Auditor  to  rely  upon 
several  agencies  in  several  important  auditing  respects. 

It  has  already  been  noted  that  the  Auditor  relies  upon  the  heads  of 
departments  and  institutions  for  the  auditing  of  materials  received, 
both  as  to  quality  and  quantity.  On  several  occasions,  the  State  Auditor 
of  Public  Accounts  has  employed  professional  accountants  to  examine 
the  records  of  departments  and  institutions  as  to  the  accuracy  of  such 
local  audits. 

The  Auditor  relies  upon  the  Secretary  of  State,  the  State  Board 
dTContracts,  and  the  Printer  Expert  as  to  the  auditing  of  the  purchase 
and  distribution  of  fuel,  stationery,  printing  and  office  supplies  to  the 
departments  housed  at  Springfield.  The  tenor  of  present  statutes 
practically  makes  necessary  the  reliance  of  the  Auditor  upon  the  Printer 
Expert  as  to  State  printing,  and  the  reliance  of  the  Auditor  upon  the 
Secretary  of  State  as  to  the  distribution  of  office  supplies  to  State 
departments  located  at  Springfield. 

The  Auditor  of  Public  Accounts  relies  upon  the  institutional 
auditor  in  the  office  of  the  Governor  as  to  the  auditing  of  the  pay  rolls 
k)f  executive  departments,  and  upon  the  Civil  Service  Commission  as 
to  the  auditing  of  the  pay  rolls  of  employees  under  the  classified  civil 
service.  Pay  rolls  under  the  classified  civil  service  are  sent  by  depart- 
ments and  institutions  directly  to  the  Civil  Service  Commission  and  are 
transmitted  by  the  secretary  of  the  Civil  Service  Commission  to  the 
State  Auditor  with  the  following  certificate  attached: 

•“Springfield :..t 

“I  hereby  certify  that  the  persons  named  in  the  attached  pay  roll  or 

voucher  of  the for  the  month  of containing 

names,  of  which are  exempt,  have  been 

appointed  or  promoted  to  or  employed  in  the  positions  or  places  and  at  the 
rates  of  compensation  indicated  in  pursuance  of  Civil  Service  Law  and  the 
rules  made  in  pursuance  thereof  as  shown  by  the  official  roster. 

Secretary  Civil  Service  Commission. 

(Form  10) 

ft 

The  entries  as  to  pay  rolls  made  in  the  ''warrant  journar’  and  "warrant 
ledger”  in  the  office  of  the  Auditor  contain  no  reference  to  the  Civil 
Service  Laws,  excepting  perhaps  in  particular  cases. 


REPORT  ON  ACCOUNTS. 


29 


The  Auditor  relies  upon  the  Board  of  Prison  Industries  for  the 
enforcement  of  the  statutory  provisions  requiring  State  departments 
and  institutions  to  purchase  such  supplies  as  the  Board  of  Prison 
Industries  may  manufacture.  It  is  customary  for  many  of  the  State 
institutions  to  obtain  “releases”  from  the  Board  of  Prison  Industries 
on  certain  articles  manufactured  by  that  Board  which  the  institutions 
desire  to  purchase  from  the  open  market.  The  numbers  of  such 
“releases”  are  usually  entered  on  the  face  of  the  vouchers  made  out  by 
the  institutions  in  question  to  the  open  market  vendor.  The  entries 
in  the  “warrant  journal”  and  “warrant  ledger”  in  the  office  of  the 
Auditor  of  Public  Accounts  contain  no  reference  to  the  procedure  as  to, 
or  the  number  of,  such  “releases.” 

Apparently  the  Auditor  of  Public  Accounts  relies  upon  the  State 
Architect  for  the  inspection  and  supervision  of  buildings  and  works 
under  construction.  No  procedure  has*  been  established  to  indicate  in 
the  records  of  the  State  Auditor  that  the  State  Architect  has  accepted 
buildings  and  works,  or  parts  of  the  constructions  thereon,  at  the  time 
that  payments  are  made  to  contractors.  The  bills  of  the  State  Architect 
for  the  two  and  one-half  per  cent  commission  allowed  to  him  under 
State  law  are  handled  in  the  same  manner  as  other  vouchers. 

It  will  be  seen  that  the  office  of  the  State  Auditor  confines  its 
audit  as  to  disbursements  in  the  great  majority  of  cases  to  an  audit  of 
the  appropriation  charge  and  to  an  audit  of  the  methods  employed  in 
the  payment  of  money.  Indirectly,  the  office  of  the  Auditor  exercises 
a very  considerable  and  beneficial  influence  towards  close  scrutinv  of 
vouchers  and  pay  rolls  by  departmental  and  institutional  officers.  This 
influence  is  actively  exercised  from  time  to  time  and  at  least  once 
during  each  biennium  by  the  employment  of  professional  accountants  to 
examine  the  records  kept  in  departments  and  at  institutions,  and  to 
make  suggestions  to  the  State  Auditor  as  to  possible  improvements  in 
such  records. 

j.  Classification  of  Rect'ipt  and  Disbursement  Accounts. 

The  revenue  accounts  in  the  office  of  the  State  Auditor  are  classi- 
fied so  as  to  distinguish  between  receipts  from  (1)  State  taxes  on  real 
and  personal  property;  (2)  State  inheritance  taxes;  (3)  collections 
by  departments  and  institutions  on  account  of  fees,  sales,  etc.  Re- 
ceipts on  account  of  State  taxes  are  further  classified  as  between : 

a.  General  revenue  fund. 

b.  State  school  fund. 

c.  University  mill  tax  fund. 

d.  Special  (other)  funds. 

A separate  account  is  maintained  with  each  collector.  This  pro- 
vides a classification  of  State  taxes  by  counties.  A similar  classification 
is  provided  for  inheritance  taxes  by  counties.  Miscellaneous  receipts 
on  account  of  fees,  sales,  and  the  like,  are  classified  simply  by  the 
names  of  the  departments  and  institutions  making  the  collections. 

Certain  data  as  to  receipts  credited  to  the  general  revenue  fund 
is  abstracted  in  the  form  of  statistical  statements.  Such  statements 
may  be  considered  as  accounts.  An  example  of  such  data  is  the  state- 


30 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


ment  filed  in  the  office  of  the  State  Auditor  as  to  the  condition  of  the 
endowment  fund  of  the  University  of  Illinois.  Other  financial  state- 
ments are  prepared  for  the  use  of  the  General  Assemh)ly  and  of  vari- 
ous State  officers,  and  copies  of  such  statements  are  to  be  found  on 
file.  A typical  statement  of  this  character  is  the  “List  of  Qaims 
Against  the  State  of  Illinois’’  filed  with  the  Auditor  of  Public  Ac- 
counts, considered  by  the  Court  of  Claims  at  its  session  of  1908  and 
1909. 

The  disbursement  accounts  maintained  by  the  Auditor  of  Public 
Accounts  are  classified  as  to  State  funds,  i.  e.,  the  general  revenue 
fund,  the  State  school  fund,  the  University  mill  tax  fund,  etc.  Dis- 
bursements are  further  classified  under  these  funds  as  to  appropri- 
ation accounts.  It  has  been  noted  that  the  “warrant  ledger”  is  so 
arranged  as  to  show  all  of  the  appropriations  made  to  a department 
or  institution  on  a single  double  page.  By  these  means,  the  dis- 
bursements on  account  of  any  institution  are  shown  in  one  place  in 
the  appropriation  ledger  and  it  may  be  considered  that  the  Auditor 
of  Public  Accounts  maintains  a classification  of  disbursements  by 
departments  and  institutions.  This  latter  classification  is  quite  in- 
complete as  to  many  of  the  departments,  for  the  reason  that  a large 
number  of  departments  receive  supplies,  fuel,  and  other  maintenance 
through  appropriations  made  to  the  Secretary  of  State  and  to  the 
State  Board  of  Contracts.  An  incomplete  system  of  accounts  show- 
ing the  distribution  of  such  supplies  and  maintenance  items  is  main- 
tained in  the  office  of  the  Secretary  of  State,  and,  if  taken  in  connec- 
tion with  the  accounts  maintained  in  the  State  Auditor’s  office,  can 
be  made  to  provide  a classification  of  disbursements  by  departments 
for  the  executive  departments  concerned. 

4.  Perpetual  Inventory. 

A very  interesting  law  was  passed  by  the  General  Assembly  of 
1913,  requiring  officers  in  charge  of  departments  and  institutions  to 
make  inventory  reports  to  the  State  Auditor  of  Public  Accounts.  (See 
page  6,  Session  Laws  of  1913.) 

The  Auditor  of  Public  Accounts  was  given  an  appropriation  of 
$6,500  for  extra  assistants  in  enforcing  this  law.  (P.  7,  Session 
Laws,  1913.)  This  law  required  every  officer,  board,  commission,  de- 
partment, and  institution  of  the  State  government,  except  the  Board 
of  Administration,  to  file  with  the  Auditor  of  Public  Accounts,  on  or 
before  September  1,  1913,  “an  inventory  of  all  of  the  property,  both 
real  and  personal,  belonging  to  the  State  of  Illinois  under  the  charge, 
care,  management,  custody  or  control  of  said  officer,  board,  commis- 
sion, department  and  institution  of  the  State  government  respectively. 

“Such  inventory  shall  contain  a true  and  correct  legal  description 
of  the  real  estate  under  the  care,  custody  or  control  of  such  officer, 
board,  commission,  department  and  institution,  and  shall  contain  a true 
and  correct  description  of  all  the  buildings  and  other  improvements 
situated  on  such  real  estate,  together  with  a statement  as  to  the  value 
’ of  such  real  estate  and  improvements. 


REPORT  ON  ACCOUNTS. 


31 


“Such  inventory  as  to  personal  property  shall  contain  an  item- 
ized statement  of  all  the  personal  property  under  the  care,  custody, 
control  and  management  of  such  officer,  board,  commission,  depart- 
ment, and  institution  respectively,  together  with  the  value  of  same.” 

This  inventory  requirement  was  very  onerous.  It  is  presumed  that 
the  State  Board  of  Administration  was  omitted  from  the  inventory 
requirement  because  of  the  inventory  system  maintained  in  the  office 
of  that  board  at  Springfield.  It  is  understood  that  all  other  agencies 
of  the  State  made  some  attempt  to  comply  with  the  requirement.  Their 
reports  were  received  and  placed  on  file  in  the  office  of  the  State 
Auditor,  but  the  appropriation  made  to  the  Auditor  was  inadequate 
to  provide  him  with  the  necessary  assistants  needed  in  the  proper 
compilation  of  such  reports  in  the  form  of  a complete  State  inventory. 

The  law  of  1913  provided  also  that  all  departments  and  institu- 
tions should  make  an  inventory  report  every  ten  days  to  the  Auditor 
of  Public  Accounts,  containing  a list  of  all  property  of  every  kind  ac- 
quired, destroyed,  or  disposed  of,  since  the  time  of  the  last  report, 
together  with  a statement  as  to  the  value  of  the  same.  It  is  understood 
that  this  requirement  has  been  disregarded  for  the  most  part.  The 
office  of  the  Auditor  of  Public  Accounts  is  not  adequately  manned  to 
take  care  of  the  great  mass  of  detail  that  such  reports  would  furnish. 
Moreover,  the  law  is  so  broad  in  its  requirements  as  to  make  its  ful- 
fillment a matter  of  the  greatest  practical  difficulty.  For  example, 
the  officers  of  the  University  of  Illinois  have  not  been  able  to  devise  a 
method  under  which  they  could  report,  once  in  ten  days,  the  exact 
amount  of  supplies  consumed  in  that  institution  during  the  ten-day 
period. 

It  may  not  be  out  of  place  to  cite  this  inventory  law  as  an  exam- 
ple of  an  accounting  requirement  plausible  in  theory,  but  exceedingly 
impracticable  in  operation. 

5.  Reports. 

All  departments  and  institutions,  including  the  Auditor  of  Pub- 
lic Accounts,  are  required  to  make  a biennial  report  to  the  Governor, 
giving  a complete  statement  as  to  receipts  and  disbursements.  All 
departments  and  institutions  are  required  to  make  a report  to  the 
Governor  as  to  receipts  and  disbursements,  at  the  close  of  each  six 
months  period,  on  April  1 and  October  1,  respectively.  These  reports 
are  received  by  the  institutional  auditor  in  the  office  of  the  Governor 
and  placed  on  file  for  the  information  of  the  Governor.  The  semi- 
annual reports  of  departments  and  institutions  are  accompanied  by 
lists  giving  the  name  of  each  person  from  whom  money  has  been 
received  and  the  name  of  the  person  to  whom  each  disbursement  has 
been  made  during  the  six  months  period. 

The  Auditor  of  Public  Accounts  has  access  to  the  reports  on  file 
in  the  office  of  the  Governor  and  they  constitute  a valuable  auditing 
check  for  the  use  of  the  office  of  the  State  Auditor  in  connection  with 
particular  cases  of  alleged  misappropriation  or  fraud.  It  is  not  known 
to  what  extent  the  reports  on  file  in  the  office  of  the  Governor  are 
used  in  this  particular. 


32 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


The  Auditor  of  Public  Accounts  makes  a report  at  the  close  of 
each  fiscal  biennium.  This  report,  for  the  most  part,  is  a transcript 
of  the  ledgers  maintained  in  the  office  of  the  Auditor,  and  in  addition 
contains  numerous  tables  originally  compiled  for  the  use  of  the  Board 
of  Equalization.  A feature  of  the  report  worthy  of  some  mention  is 
the  detailed  manner  in  which  receipts  into  funds  and  disbursements 
from  appropriations  are  described.  For  example,  the  first  statement 
in  the  report  is  a ‘‘statement  of  receipts  and  disbursements  of  the  gen- 
eral revenue  fund.”  The  statement  of  receipts  into  the  general  rev- 
enue fund  gives  a detailed  list  of  miscellaneous  receipts  with  such  ex- 
planations as  “from  F.  W.  DeWolf,  Acting  Director  of  Geological 
Survey,  for  sale  of  bulletins,”  and  “from  John  B.  Jackson,  Anna,  net 
balance  due  State  from  ordinary  and  special  funds  of  Southern  Hos- 
pital for  the  Insane.”  In  a similar  way,  in  statement  number  three, 
a list  of  disbursements  is  given,  classified  under  departments  by  appro- 
priation acts. 

The  biennial  report  of  the  office  of  the  Auditor  of  Public  Ac- 
counts gives  an  adequate  statement  of  the  accounts  maintained  in  that 
office. 

E.  ACCOUNTS  AND  ACCOUNTING  PROCEDURE  IN  THE  OFFICE  OF  THE 

STATE  TREASURER. 

The  office  of  the  State  Treasurer  is  concerned  with  the  keeping 
and  handling  of  cash.  It  is  not  an  auditing  office. 

Register  of  Warrants. 

Warrants  must  be  countersigned  by  the  State  Treasurer  before 
they  are  issued  by  the  State  Auditor.  At  the  time  that  warrants  are 
received  in  the  office  of  the  State  Treasurer  for  countersignature,  they 
are  registered  consecutively  by  numbers  in  a “warrant  register.”  This 
“warrant  register”  gives  the  date  and  number  of  the  warrant,  the 
name  of  the  payee,  and  the  amount.  The '“warrant  register”  main- 
tained by  the  State  Treasurer  is  checked  periodically  with  the  “war- 
rant journal”  maintained  in  the  office  of  the  State  Auditor. 

Accounting  for  Cash  Received. 

All  cash  received  into  the  State  treasury  is  officially  received  on 
an  order  issued  by  the  State  Auditor.  (See  form  4 as  an  illustration 
of  such  an  order.)  The  amount  received  is  posted  to  a “cash  book” 
having  the  following  columns. 

1.  Date. 

2.  Order  number. 

3.  Description. 

4.  Items  amount. 

5.  Totals  amount. 

Receipts  are,  of  course,  posted  to  the  debit  side  of  the  “cash  book.” 

The  office  of  the  State  Treasurer  makes  no  audit  as  to  moneys  re- 
ceived excepting  to  inquire  as  to  the  character  of  commercial  paper 
such  as  checks  and  drafts,  when  presented  as  a payment  into  the 
treasury.  v 


REPORT  ON  ACCOUNTS. 


33 


Accounting  Procedure  for  Disbursements. 

The  cashier  in  the  office  of  the  State  Treasurer  maintains  a “cash 
book”  in  which  are  listed  canceled  warrants  as  they  are  received.  (See 
form  11.)  Canceled  warrants  usually  come  to  the  office  of  the  State 
Treasurer  from  banks.  It  is  customary  for  the  cashier  to  enter  war- 
rants received  from  a given  bank  in  his  “cash  book”  in  a group  of 
entries  with  the  name  of  the  bank  written  in  as  a sub-heading.  A 
separate  sheet  in  the  cashier’s  “cash  book”  is  maintained  for  each 
day’s  business.  This  enables  the  cashier  to  trace  the  total  paid  war- 
rants handed  to  him  by  any  bank  on  any  given  date.  The  cashier  also 
enters  in  his  “cash  book”  the  number  and  amount  of  any  warrant 
paid  by  him  over  the  counter. 

The  warrants  paid  and  canceled  on  each  day  are  also  entered  con- 
secutively by  numbers  on  an  adding  machine  form  bearing  the  heading 
“warrants  paid  and  canceled.”  ^ 

I.  Number. 

. 2.  Amount. 

3.  Number. 

4.  Amount. 

5.  Number. 

6.  Amount. 

This  adding  machine  form  is  a very  convenient  form.  It  is  made 
to  fit  into  a loose-leaf  binder  as  a permanent  record,  and  from  it  post- 
ings are  made  to  the  credit  side  of  the  “cash  book.”  A separate  “war- 
rants paid  and  canceled”  sheet  is  used  each  day  for  each  State  fund. 

The  total  amount  of  the  “warrants  paid  and  canceled”  sheet  for 
each  fund  is  posted  each  day  to  the  credit  side  of  the  “cash  book” 
with  the  explanation  “as  per  list.” 

“Cash  Ledger'' 

The  debits  and  credits  in  the  “cash  book”  are  posted  each  day  to 
a “cash  ledger.”  This  ledger  is  in  the  usual  ledger  form.  Accounts 
are  maintained  in  the  ledger  with  each  of  the  funds  of  the  State. 

Local  Bond  Cash  Transactions. 

Under  Chapter  113  of  the  Statutes,  the  various  municipal  cor- 
porations of  the  State  have  issued  the  bonds  of  such  corporations  to 
aid  in  such  local  improvements  as  the  building  of  railroads  and  other 
public  utilities.  These  bonds  are  secured  by  special  taxes,  which  have* 
been  collected  into  the  State  treasury  and  are  accounted  for  under 
what  is  known  as  the  “Local  Bond  Fund.”  The  coupons  on  these 
bonds  are  usually  payable  semi-annually,  and  are  commonly  paid  by 
banks  throughout  the  State  upon  their  presentment  by  bondholders, 
although  such  coupons  are  also  honored  over  the  counter  of  the  State 
Treasurer.  As  the  amount  of  money  paid  to  any  one  holder  of  such 
bonds  is  usually  small,  a convenient  procedure  has  grown  up  in  the 
office  of*  the  State  Treasurer  for  the  handling  of  such  bond  trans- 
actions directly  by  the  Treasurer,  with  only  periodical  review  by  the 
State  Auditor. 


34 


J EFFICIENCY  AND  ECONOMY  COMMITTEE. 


Coupons  paid  by  banks  are  mailed  by  them  to  the  office  of  the 
State  Treasurer  at  the  same  time  and  in  the  same  way  as  the  banks 
present  State  warrants  which  they  have  paid.  Such  coupons  paid  by 
banks  are  entered  by  the  cashier  in  his  “cash  book.”  (See  form  11.) 
The  cashier  also  enters  in  his  “cash  book”  payments  of  coupons  made 
by  him  over  the  counter. 

A separate  cash  book  is  maintained  for  bond  transactions  known 
as  the  “daily  bond  cash  book.”  It  has  the  following  columns : 

1.  Date. 

I 2.  Items. 

jl  3.  Debit. 

‘ 4.  Credit. 

5.  Balance. 

In  this  .“daily  bond  cash  book”  the  bond  taxes  transmitted  by  the 
/ County  Treasurer  are  debited  as  received.  Daily  payments  are  cred- 
ited by  items.  After  crediting  daily  payments  by  coupon  numbers,  the 
coupons  paid  under  each  bond  issue  during  the  day  are  placed  in  small 
envelopes.  The  receipts  from  county  treasurers,  debited  in  the  “daily 
bond  cash  book,”  are  transferred  item  by  item  to  a similar  cash  book 
known  as  “bond  cash  book  number  two.”  The  form  of  this  cash 
book  is  the  same  as  that  of  the  “daily  bond  cash  book.”  The  credits 
to  this  “bond  cash  book  number  two”  are  the  warrants  issued  periodi- 
cally by  the  Auditor.  From  time  to  time  the  Auditor,  or  his  repre- 
sentative, comes  to  the  office  of  the  Treasurer  and  draws  a warrant 
covering  all  bond  coupon  payments  for  which  he  has  not  drawn  a 
warrant.  It  is  these  periodical  warrants  that  are  credited  in  the  “bond 
cash  book  number  two.” 

It  will  be  seen  that  the  procedure  in  handling  the  payment  of 
local  improvement  bond  coupons  is  much  the  same  as  that  employed 
in  a commercial  house  for  the  handling  of  petty  cash  items. 

During  the  period  in  which  coupon  payments -are  carried  on  the 
first  bond  cash  book  without  the  authority  of  the  State  Auditor’s  war- 
rant, the  sum  of  such  payments  is  carried  in  the  reports  of  the  State 
Treasurer  as  an  asset  item  similar  to  cash  for  which  the  State  Treas- 
urer is  personally  responsible. 

The  State  Treasurer  is  in  effect  the  auditor  of  the  payment  of 
registered  local  bond  coupons,  although  he  is  relieved  periodically  of 
* his  responsibility  by  the  drawing  of  the  Auditor’s  warrant.  The  State 
Treasurer  has  in  his  vault  a file  of  local  improvement  bonds  indexed 
by  counties,  cities  and  towns.  The  office  of  the  State  Treasurer  also 
maintains  a “bond  register.”  A page  of  thia  “bond  register”  is  used 
for  each  bond  issue  of  each  county,  city  or  town.  The  register  gives 
such  information  as  the  name  of  the  municipal  corporation  issuing 
the  issue,  the  names  and  titles  of  the  officers  signing  the  bonds,  the 
' place  where  the  bpnds  are  payable,  the  total  amount  of  the  issue,  the 
date  of  the  issue,  the  due  date  of  the  issue,  the  interest  rate,  the  dates 
and  amounts  of  the  issue  disposed  of  at  various  times,  and  the  dates 
and  amounts  of  the  issue  paid  at  various  times.  The  State  Auditor 


REPORT  ON  ACCOUNTS. 


35 


makes  an  abstract  from  this  “bond  register”  and  includes  a typewritten 
statement  as  to  each  issue  with  his  report  to  the  county  officers  at  the 
time  of  tax  levying. 

Monthly  Reports  of  the  Treasurer. 

At  the  end  of  each  month,  the  State  Treasurer  makes  a complete 
report  to  the  State  Auditor.  (See  form  13.)  This  report  shows  the 
amount  received  in  each  State  fund  and  to  the  credit  of  each  local 
bond  fund  and  the  amount  paid  from  each  State  fund  and  from  each 
local  bond  fund^  The  monthly  report  is  accompanied  by  a detailed 
statement  of  receipts  into  local  bond  funds  during  the  month  ( form 

14)  and  of  the  warrants  paid  and  canceled  against  State  funds  ( form 

15)  and  against  local  bond  funds  (form  16)  during  the  month. 

The  office  of  the  State  Auditor  audits  this  monthly  report,  check- 
ing,.the  Treasurer’s  statement  as  to  fund  receipts  against  the  duplica- 
tion of  Treasurer’s  receipts  on  file  in  the  office  of  the  State  Auditor, 
and  against  the  duplicates  of  Auditors’  orders  on  file  in  the  office  of 
the  State  Auditor,  and  checking  the  State  Treasurer’s  statement  of 
fund  disbursements  against  the  “warrant  journal”  in  the  office  of  the 
State  Auditor. 

State  Depositaries. 

Under  State  law,  the  State  Treasurer  is  required  to  deposit  funds 
in  such  banks  as  he  may  select.  To  protect  himself  in  such  deposits 
the  State  Treasurer  requires  banks  to  deposit  securities  with  the  bank 
that  is  the  chief  depositary  of  the  State  Treasurer.  The  requirements 
concerning  such  securities  are  set  forth  in  a printed  notice  sent  by 
the  State  Treasurer  to  each  depositary.  (See  form  A.)  One  of  the 
securities  required  by  the  State  Treasurer  is  the  adoption  of  a resolu- 
tion giving  the  State  Trea.surer  power  over  the  securities  deposited. 
(See  forms  B and  C.) 

The  State  Treasurer  maintains  a ledger.  On  a separate  sheet 
for  each  depositary,  the  Treasurer  makes  a record  of  the  securities 
deposited  by  that  depositary  and  the  return  of  such  securities  to  the 
depositary.  On  another  sheet  in  the  same  ledger,  the  State  Treasurer 
makes  a record  of  the  money  deposited  with  each  depositary  and  of 
the  transfers  of  such  money  from  the  depositary  to  Chicago  banks, 
through  which  State  warrants  are  cleared. 

At  the  end  of  each  month,  the  State  Treasurer  requires  his  office 
to  make  a report  to  him  showing  on  the  debit  side  the  amounts  depos- 
ited in  the  several  State  depositaries,  the  amount  of  coupon  payments 
not  as  yet  relieved  by  the  warrant  of  ihe  State  Auditor,  and  the  amount 
of  cash  on  hand.  On  the  credit  side  of  this  report,  is  given  the  cash 
balance  in  each  of  the  funds  in  the  State.  Supplementary  to  this  bal- 
ance sheet,  a report  is  made  to  the  Treasurer  of  the  receipts  into,  and 
disbursements  from  depositaries  during  the  month,  and  receipts  into 
and  disbursements  from  State  funds  during  the  month. 

It  will  be  seen  that  the  Treasurer  has  for  his  personal  use  a double 
entry  trial  balance,  as  between  depositaries,  coupon  payments,  and  cash, 
on  the  one  hand,  and  the  balances  in  State  funds,  for  which  he  is  re- 
sponsible, on  the  other  hand. 


36 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


Biennial  Report  of  the  Treasurer. 

The  Treasurer  makes  a biennial  report  showing  the  receipts  into, 
and  the  disbursements  from  the  several  State  funds  dui*ing  the  bien- 
nium. 

F.  CONCLUSIONS. 

In  preceding  pages,  an  attempt  has  been  made  to  give  an 
outline  of  the  accounting  system  of  the  State.  The  study  made  in 
gathering  materials  for  this  working  outline  has  been  by  no  means 
exhaustive  or  conclusive.  It  may  be  valuable,  howevei^  to  state  certain 
general  conclusions  formed  during  the  progress  of  the  report. 

1.  The  present  Constitution  of  the  State  makes  ample  provision 
for  the  establishment  of  a scientific  budget  and  appropriation  control, 
of  cost  accounts,  and  of  asset  and  liability  accounts. 

2.  The  Constitution  does  not  center  all  of  the  accounting  respon- 
sibility in  the  office  of  the  Auditor  of  Public  Accounts,  but,  by  infer- 
ence, leaves  the  establishment  of  accounting  responsibility  to  such  laws 
as  may  be  passed  by  the  General  Assembly. 

3.  The  General  Assembly  has  by  law  made  various  agencies  in 
the  State  government  responsible  for  the  auditing  of  various  classes  of 
transactions. 

4.  The  office  of  the  Auditor  of  Public  Accounts  is  the  agency 
through  which  the  tax  rate  of  the  State  is  computed  and  the  tax  laws  of 
the  State  are  enforced. 

5.  The  accounting  and  auditing  procedure  in  the  office  of  the 
Auditor  of  Public  Accounts  is  concerned  chiefly  with  the  enforcement 
of  appropriation  laws  to  the  end  that  departments  may  not  exceed 
their  appropriations,  and  to  the  end  that  departments  may  not  make 
charges  against  appropriations  not  contemplated  by  the  General 
Assembly. 

6.  The  present  system  of  appropriation  laws  is  far  from  being  a 
scientific  one.  The  State  Auditor  will  be  greatly  aided  in  his  work  if 
appropriations  are  passed  in  the  form  of  a classified  budget. 

7.  The  State  Treasurer  is  not  an  auditing  officer,  but  has  large 
responsibilities  in  the  handling  of  cash. 

8.  The  present  accounting  procedure  in  State  offices  is  confined 
to  cash  receipts  and  cash  disbursements,  and  is  both  adequate  and  well 
enforced  as  a system  of  cash  bookkeeping.  (Some  slight  duplication  of 
work  has  been  noted.  Upon  investigation  it  may  be  found  that  this 
duplication  of  work  is  more  than  offset  by  the  extra  protection  it 
affords.) 

9.  No  attempt  is  made  to  record  accounts  payable  of  various 
departments  and  institutions  in  the  office  of  the  State  Auditor.  It  would 
seem  that  some  system  showing  accounts  payable  and  orders  and  con- 
tracts outstanding  should  be  maintained,  either  by  departments  and 
institutions,  or  by  the  State  Auditor. 

10.  The  present  reports  of  departments  and  institutions,  and  of 
the  State  Auditor,  give  a very  great  deal  of  detail  with  regard  to  names 
of  persons  paying  moneys  into  the  State  treasury,  and  with  regard  to 
names  of  persons  to  whom  State  warrants  are  made  payable.  It  would 


REPORT  ON  ACCOUNTS. 


37 


seem  that  some  of  this  detail  might  be  well  replaced  by  accounts  giving 
a more  systematic  analysis  of  the  purposes  for  which  appropriations 
are  expended  by  departments  and  institutions.  In  this  connection, 
reference  is  made  to  the  report  of  the  Comptroller  of  the  University  of 
Illinois,  for  the  biennium  ending  June  30,  1913. 

11.  The  present  inventory  law  is  impracticable  and  should  be 
replaced  by  a more  practical  system  for  the  recording  of  the  properties 
owned  by  the  State. 

List  of  Forms. 


Number 


Valuation  of  property  listed  for  taxation 1 

Auditor’s  circular  letter  giving  tax  rate 2 

County  collector’s  statement  of  account 3 

Auditor’s  order  for  Treasurer  to  receive  taxes  from  county  collector  4 

'^County  treasurer’s  report  of  inheritance  tax  collections 5 

Copy  of  inheritance  tax  receipt 6 

Auditor’s  order  for  Treasurer  to  receive  money 7 

List  of  warrants *. 8 

Warrant  journal 9 

Pay  roll  certificate  of  Civil  Service  Commission  (See  page  37) ....  10 

Cashier’s  cash  book 11 

Warrants  paid  and  cancelled 12 

Treasurer’s  monthly  report  of  Local  Bond  Funds  received 13 

Treasurer’s  monthly  report  to  Auditor 14 

Treasurer’s  monthly  statement  of  warrants  paid  and  cancelled.  ...  15 
Treasurer’s  monthly  statement  of  Local  Bond  Fund  warrants  paid 

and  cancelled 16 

Statement  of  securities  required  of  depositaries A 

Forms  of  adoption  of  resolution  giving  Treasurer  power  over 
securities  deposited B-C 


II.  ACCOUNTING  NEEDS  OF  THE  STATE  OF  ILLINOIS. 

INTRODUCTION. 

The  State  of  Illinois  needs  a complete  system  of  accounting.  The 
present  accounts  of  the  Auditor  of  Public  Accounts,  and  of  State 
departments  and  institutions,  are  confined  to  records  of  cash  receipts 
and  disbursements.  The  present  accounts  satisfy  the  requirements  of 
the  Illinois  statutes  as  to  legal  safeguards  for  the  handling  of  public 
money.  But  every  business  man  who  has  had  occasion  to  refer  to 
Illinois  financial  reports  knows  that  the  present  cash  accounts  do  not 
adequately  reflect  the  important  work  of  the  State,  and  that  such 
accounts  cannot  be  used  intelligently  in  planning  the  ever  increasing 
work  of  the  State.  The  business  men  of  Illinois  are  accustomed  to 
conduct  even  small  commercial  enterprises  by  constant  reference  to 
clear  cut  balance  sheets  and  carefully  classified  statements  of  revenue 
and  expenditure. 

It  is  not  to  be  inferred  that  forms  and  methods  of  commercial 
accounting  should  be  installed  in  State  offices.  The  accounting  of  the 
State  of  Illinois  must  be  governmental  accounting — it  must  be  based  on 
the  legal  organization  of  the  State.  The  accounts  of  the  State  must  be 
of  service  in  governmental  transactions  and  for  governmental  purposes. 
Indeed,  governmental  accounts  cannot  be  used  in  many  ways  that  com- 
mercial accounts  are  used.  The  balance  sheet  of  a commercial  organiza- 
tion is  frequently  used  as  a credit  instrument  in  the  borrowing  of 
money.  But  the  State  cannot  mortgage  its  land  and  buildings  and, 
hence,  does  not  need  a balance  sheet  for  borrowing  purposes.  The 
State  does  need  a record  of  its  assets  for  governmental  purposes,  such 
as  the  safeguarding  of  public  property  and  the  computation  of  amounts 
needed  for  the  repair  and  replacement  of  buildings. 

While  the  specific  uses  of  State  accounts,  differ  widely  from  the 
specific  uses  of  commercial  accounts,  the  accounting  system  needed  by 
the  State  of  Illinois  and  the  accounting  system  needed  by  any  business 
enterprise  agree  in  two  fundamental  requirements : 

1.  The  provision  of  auditing  safeguards  over  the  custody  and  use 
of  money,  credit  and  permanent  property. 

2.  The  provisions  of  records  and  reports  of  financial  transactions 
for  the  information  of  those  who  plan  and  carry  out  such  transactions. 

The  purpose  of  this  report  is  to  point  out  in  some  detail  the  present 
accounting  needs  of  the  State  and  to  suggest  a basis  for  complete 
accounting.  This  report  is  not  an  attempt  to  set  out  a system  of 
accounts  as  such. 

The  preparation  and  installation  of  a complete  accounting  system 
for  the  State  will  involve  a very  considerable  amount  of  constructive 


REPORT  ON  ACCOUNTS. 


( work  of  the  first  order.  This  report  will  serve  its  purpose  if  it  attracts 
i attention  to  the  pressing  need  for  constructive  accounting  work.  The 
■ General  Assembly  should  create  an  authority  charged  with  the  duty  of 
•'  installing  and  maintaining  proper  accounts  for  the  business  of  the 
State  of  Illinois,  and  this  authority  should  engage  a permanent  staff  of 
competent  accountants.  It  will  take  time  and  effort  to  install  proper 
accounts,  to  maintain  proper  accounts,  and  to  revise  the  accounting 
system  to  meet  changing  conditions. 

AUDITING  REQUIREMENTS  OF  THE  STATE. 

The  following  auditing  safeguards  should  be  provided  by  the 
accounting  and  reporting  system  of  the  State : 

1.  The  receipt  and  disbursement  of  public  money  should  be  safe- 
guarded to  prevent  fraud  and  embezzlement  on  the  part  of  officers 
charged  with  the  financial  transactions  of  the  State. 

2.  The  records  and  audits  of  receipts  should  make  certain,  first, 
that  all  money  collectable  has  been  collected  or  accounted  for,  and, 
second,  that  all  money  collected  has  been  collected  under  law  and  by  the 
methods  set  forth  in  the  law. 

3.  The  records  and  audits  of  disbursements  should  make  certain 
that  all  public  money  disbursed  has  been  disbursed  under  law  and  by 
the  methods  prescribed  by  law. 

4.  The  records  and  audits  of  disbursements  should  make  certain 
that  the  State  has  received  full  value  for  each  disbursement  of  public 
money. 

5.  The  records  and  reports  of  outstanding  encumbrances  on 
account  of  contracts,  open  market  orders,  and  salary  obligations,  should 
make  certain  that  the  credit  of  the  State  is  pledged  only  to  the  extent 
provided  for  in  appropriation  laws. 

6.  The  records  and  reports  of  the  permanent  assets  of  the  State, 
and  the  verification  of  such  records  and  reports  by  actual  inspection, 
should  make  certain  that  the  property  of  the  State  is  properly  used, 
safeguarded,  and  accounted  for. 

These  accounting  requirements  are  fundamental,  and  must  be 
squarely  and  fully  met  by  any  accounting  system  devised  for  any  de- 
partment or  institution  of  the  State  government. 

The  Constitution  and  laws  of  the  State  of  Illinois  adequately 
provide  for  the  fundamental  requirements  of  good'  governmental 
accountancy.  The  Constitution  and  laws  provide  that  no  revenue  shall 
be  collected  and  that  no  money  shall  be  spent,  excepting  under  legis- 
lative enactment.  The  Constitution  specifically  provides  that  appropria- 
tions shall  be  made  from  biennium  to  biennium.  In  this  way,  the 
General  Assembly  is  compelled  to  set  up  a financial  program  for  each 
successive  biennium.  The  Constitution  provides  that  the  Governor 
shall  lay  recommendations  before  the  General  Assembly  as  to  the 
revenues  and  appropriations  necessary  for  the  next  biennium.  In  this 
way,  the  Constitution  clearly  contemplates  the  modern  budget  method 
of  State  finance.  The  Constitution  provides  for  a State  Treasurer  and 
for  an  Auditor  of  Public  Accounts.  The  Constitution  provides  that  the 
bonded  debt  of  the  State  shall  be  limited  to  two  hundred  fifty  thou- 


40 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


sand  dollars,  and  the  inference  is  plain  that  the  contractual  obligations 
of  the  State  shall  be  kept  within  the  appropriations  passed  by  the 
General  Assembly  for  each  biennium.  Wrongful  use  of  public  property 
is  made  a misdemeanor,  and  the  State  law  provides  for  inventory 
reports  to  the  office  of  the  Auditor  of  Public  Accounts. 

The  safeguarding  of  State  money.  State  credit,  and  State  property 
is  clearly  a duty  of  the  officers  of  the  State,  irrespective  of  specific  laws 
and  Constitutional  provisions. 

THE  NEED  FOR  FINANCIAL  INFORMATION. 

But  a plan  of  accounting  for  the  State  of  Illinois  must  do  more 
than  protect  public  money,  and  public  credit,  and  public  property 
against  embezzlement. 

In  addition  to  providing  protection  as  to  the  handling  of  public 
money,  the  financial  and  accounting  system  of  the  State  must  afford 
data  needed  by  all  of  those  who  have  to  do  with  the  planning  and 
carrying  out  of  the  financial  program  for  each  biennium.  The  account- 
ing system  of  the  State  must  aiford  information  for  the  following 
officers : 

1.  The  members  of  the  General  Assembly. 

2.  The  Governor. 

3.  The  State  Tax  Board. 

4.  The  State  Board  of  Equalization. 

5.  The  Auditor  of  Public  Accounts. 

6.  The  State  Treasurer. 

7.  The  heads  of  departments  and  members  of  boards  in  charge  of 
institutions. 

8.  The  employees  responsible  for  activities  of  departments  and 
institutions. 

The  public  at  large  will  also  make  demands  upon  the  accounting 
system  of  the  State ; first  of  all,  as  taxpayers  from  whose  pockets  the 
necessary  revenue  must  come  to  meet  appropriations ; and  second,  as 
citizens  interested  in  one  or  more  of  the  various  departments  and 
institutions^ of  the  State,  because  of  the  connection  of  those  depart- 
ments with  their  private  business  and  private  life.  The  publication  of 
financial  reports  in  understandable  form  will  in  itself  increase  the 
interest  of  citizens  in  the  public  welfare  service  performed  by  each 
State  department  and  State  institution. 

ACCOUNTING  INFORMATION  NEEDED  BY  MEMBERS  OF  THE 
GENERAL  ASSEMBLY. 

To  carry  out  their  responsibilities  in  enacting  the  financial  pro- 
gram of  the  State,  the  members  of  the  General  Assembly  need,  first, 
information  upon  which  revenue  laws  and  appropriation  Acts  can  be 
based ; second,  a record  kept  up  from  day  to  day  during  the  session 
of  the  General  Assembly  as  to  the  effect  upon  the  complete  financial 
program  of  the  State  of  revenue  laws  and  appropriations  as  they  are 
passed ; and,  third,  a final  budget  to  be  prepared  at  the  conclusion 
of  the  session,  showing  an  estimate  of  revenue  and  a statement  of 
appropriations  under  the  laws  passed. 


REPORT  ON  ACCOUNTS. 


41 


Each  department  and  institution  of  the  State  should  be  required 
to  report  to  the  Governor,  or  to  some  authority  designated  by  the 
Governor,  an  estimate  of  its  needs  for  the  next  biennium,  classified  so 
as  to  show  the  estimated  cost  of  each  kind  of  service  and  material 
needed  for  each  activity  of  the  department  or  institution.  Each  depart- 
ment and  institution  acting  as  a collecting  agency  should  report  to  the 
same  authority  an  estimate  of  the  revenue  collectable  during  the  next 
biennium.  The  basis  for  this  estimate  should  be  existing  revenue  laws. 
There  should  be  prepared  an  estimate  of  the  revenue  collectable  dur- 
ing the  next  biennium  from  State  taxes,  if  tax  rates  and  tax  laws  re- 
main the  same  as  they  were  during  the  biennium  at  the  close  of  which 
the  General  Assembly  meets.  From  this  information,  the  Governor, 
or  the  budget-making  authority  designated,  should  prepare  a “proposed 
budget.” 

This  statement  of  budget  proposals  should  compare  requests  for 
appropriations  with  an  estimate  of  the  revenue  available  for  the  bien- 
nium under  existing  revenue  laws  and  rates. 

This  comparison  should  be  by  funds,  e.  g.,  the  requests  for  appro- 
priations from  the  general  revenue  fund  should  be  compared  with  an 
estimate  of  the  revenue  collectable  for  that  fund.  The  revenue  of  the 
State  is  now  segregated  into  the  following  funds: 

1.  The  general  revenue  fund. 

2.  State  school  fund. 

3.  University  mill  tax  fund. 

4.  State  game  protection  fund. 

5.  State  fish  protection  fund. 

6.  State  food  commission  fund. 

7.  Board  of  administration  fund. 

8.  Miners’  examining  fund. 

9.  School  text  book  fund. 

Some  of  these  funds  are  without  definite  meaning,  in  that  the 
present  policy  of  the  State  does  not  seem  to  require  the  setting  aside 
of  money  for  the  exclusive  use  indicated  by  the  titles  of  the  funds. 
But  some  of  the  specific  funds,  such  as  the  school  fund  and  the  uni- 
versity mill  tax  fund,  do  express  established  public  pqlicy.  The  bud- 
get proposals  should  be  classified  by  funds  if  for  no  other  reason  than 
that  such  a classification  will  test  the  necessity  for  each  fund. 

The  estimate  of  revenue  for  each  fund  should  be  classified  so  as 
to  show  the  amount  of  each  kind  of  revenue  collectable  by  each  col- 
lecting agency  of  the  State.  Such  a classification  will  bring  into  re- 
view biennially  the  machinery  under  which  each  kind  of  State  revenue 
is  collected.  Estimates  of  revenue  collectable  cannot  be  scrutinized 
intelligently  without  reference  to  collection  agences ; first,  because  such 
estimates  will  originate  with  collection  agencies,  and,  second^,  the 
method  of  collection  has  very  much  to  do  with  the  amount  of  revenue 
actually  collectable  under  any  revenue  law.  For  example,  the  office 
of  the  Attorney  General  supervises  the  administration  of  inheritance 
taxes.  It  is  to  be  expected  that  budget-making  authorities  will  con- 
sult the  office  of  the  Attorney  General  in  fixing  an  estimate  on  inherit- 
ance taxes  collectible  during  a biennium,  and  it  is  to  be  expected  fur- 


42 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


ther  that  the  Legislature  will  consider  the  personnel,  organization  and  * 
procedure  of  the  office  of  the  Attorney  General  in  reviewing  the  esti- 
mate. 

The  estimate  of  revenue  collectable  by  each  collection  agency 
should  be  classified  as  to  kind  of  revenue;  since  a given  agency  may 
turn  receipts  into  the  State  treasury  derived  from  widely  varying 
classes  of  revenue.  The  office  of  the  Secretary  of  State,  for  example, 
collects  such  widely  different  revenue  as  that  derived  from  automobile 
licenses  and  that  derived  from  fees  for  the  filing  of  papers  of  incor- 
poration. 

Appropriation  requests  from  each  fund  should  be  classified  so  as 
to  show  the  total  amount  requested  by  each  department  and  institu- 
. tion.  Many  of  the  departments  of  the  State  are  beneficiaries  under 
general  appropriations  for  salaries  and  for  printing,  supplies  and  the 
like  administered  by  the  State  Board  of  Contracts  and  the  Secretary 
of  State.  Appropriation  requests  should  be  so  classified  in  the  state- 
ment of  budget  proposals  as  to  show  the  amounts  requested  by  each 
department  for  its  direct  use,  and  so  as  to  show  also  the  amount  that 
each  department  expects  to  share  in  general  appropriations.  The  effect 
of  such  a classification  will  be  to  fix  responsibility  for  the  use  of  public 
supplies  even  although  general  appropriations  are  continued  as  a 
means  of  purchasing  and  other  administrative  economy. 

The  appropriation  requests  of  each  department  and  institution 
should  be  classified  first  of  all,  as  between  requests  for  land,  buildings 
and  permanent  equipment,  and  requests  for  operation  and  maintenance 
expenses.  Land,  building  and  equipment  requests  should  be  further 
classified  by  projects.  Operation  and  maintenance  requests  should  be 
classified  by  units  of  operation  so  that  the  Legislature  may  know  how 
much  each  department  and  institution  requests  for  each  of  its  internal 
divisions,  activities  or  functions.  The  statement  of  proposed  expendi- 
ture for  each  activity  should  be  supported  by  estimates  of  the  cost  of 
each  kind  of  service  and  each  kind  of  material  needed  in  carrying  on 
the  activity  during  the  biennium.  For  example,  the  office  of  the 
Auditor  of  Public  Accounts  should  give  information  along  the  fol- 
lowing lines  in  support  of  the  appropriation  requests  for  the  office: 

1.  From  the  general  revenue  fund — 

A.  For  permanent  equipment. 

(1)  Furniture  and  fixtures. 

B.  For  operation  and  maintenance. 

(1)  General  administration. 

(a)  Salaries  and  wages. 

(b)  Stationery  and  postage. 

(c)  Telegraph  and  telephone. 

(d)  Freight  and  express. 

(e)  Office  supplies. 

(2)  Audit  of  revenue  collections. 

(a)  Salaries  and  wages. 

(b)  Stationery  and  postage. 

(c)  Telegraph  and  telephone. 


REPORT  ON  ACCOUNTS. 


43 


(d)  Freight  and  express. 

(e)  Office  supplies. 

, (3)  Audit  of  disbursements  under  appropriations. 

(a)  Salaries  and  wages. 

(b)  Stationery  and  postage. 

(c)  Telegraph  and  telephone. 

(d)  Freight  and  express. 

(e)  Office  supplies. 

(4)  State  inventory. 

(5)  Examination  of  banks,  trust  companies  and  loan  com- 

panies. 

(6)  Etc.^ 

The  purpose  of  the  ‘‘proposed  budget”  is  to  show  an  estimate  of 
revenue  for  the  next  biennium,  set  over  against  the' appropriation  re- 
quests for  the  next  biennium.  In  order  that  these  estimates  and  re- 
quests may  have  a definite  meaning  and  connection  with  the  previous 
financial  policy  of  the  State,  the  estimates  of  revenues  should  be  com- 
pared with  actual  receipts ; and  appropriation  requests  should  be  com- 
pared with  actual  disbursements  for  the  two  bienniums  preceding  the 
biennium  for  which  the  appropriations  are  asked.  Inasmuch  as  the 
General  Assembly  meets  during  the  second  year  of  the  biennium  next 
preceding  the  biennium  for  which  appropriations  are  asked,  it  will  be 
necessary  to  set  up  an  estimate  for  that  year,  both  as  to  receipts  and 
as  to  disbursements.  A form  for  a summary  of  budget  proposals  by 
funds  is  shown  as  Schedule  1 ; a form  for  the  comparison  of  revenue 
estimates  with  previous  receipts  is  shown  as  Schedule  2,  and  a form 
for  the  comparison  of  appropriation  requests  with  disbursements  is 
shown  as  Schedule  3.  These  schedules  are  introduced  to  illustrate  the 
comparison  essential  to  budget-making.  ^ 

SCHEDULE  1. 

for  the  Biennium  ipi^-ipiy. 

Estimated  Revenue  Appropriation  !^equests 

Fund  Amount  Fund  Amount 

General  Revenue  Fund  General  Revenue  Fund  

*Excess  of  Requests  


School  Fund  School  Fund 

*Excess  of  Requests 

University  Mill  Tax  Fund, 
etc.  


*The 'essential  point  is  that  the  appropriation  requests  from  each  fund  shall  be  con- 
trasted with  the  estimate  of  revenue. for  each  fund.  The  summary  may  take  several  forms. 


44 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


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'A  similar  statement  should  be  prepared  for  each  fund. 


SCHEDULE  4. 

Comparison  of  Appropriation  Requests  for  the  Biennium  ipiyipiy 
With  Appropriations  for  the  Biennium  ipij-75. 

Request  Request  Appropriation  Appropriation 


REPORT  ON  ACCOUNTS. 


45 


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46 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


The  best  test  that  the  proposed  budget  can  have  lies  in  the  com- 
parison of  the  estimate  of  revenue  and  appropriation  requests  with  the 
actual  and  estimated  receipts  and  disbursements  for  the  two  preceding 
bienniums.  An  additional  comparison  of  great  value  is  a comparison 
of  the  estimate  of  revenue  and  appropriation  requests  with  the  estimate 
of  revenue  and  appropriations  enacted  by  the  preceding  General 
Assembly.  The  form  of  such  a comparison  is  shown  in  Schedule  4. 
It  may  be  noted  in  this  connection  that  the  State  law  now  provides  for 
budget  data  in  this  form,  to  be  compiled  by  the  Legislative  Reference 
Bureau. 

The  form  of  the  “proposed  budget”  suggested,  provides  for  a 
classification  of  revenue  estimates  and  of  appropriations,  first  of  all, 
under  funds,  and  then,  by  collecting  agencies  for  revenue  and  by  de- 
partments and  institutions  for  appropriations.  It  will  be  found  desirable 
to  set  up  a summary,  so  as  to  show  the  total  estimate  for  each  kind  of 
revenue,  no  matter  to  what  fund  the  revenue  is  to  accrue,  or  by  what 
collecting  agency  it  is  to  be  secured.  A similar  summary  should  be 
made  for  the  proposed  appropriations  for  similar  activities  under  de- 
partments and  institutions.  Thus,  for  example,  a summary  may  be 
made  of  the  requests  for  carrying  on  health  and  sanitation  work,  bring- 
ing together  in  one  schedule  the  provision  made  for  such  work  in  the 
requests  of  different  departments  and  institutions. 

The  General  Assembly  as  a body,  and  especially  individual  mem- 
bers, will  be  particularly  interested  in  the  appropriation  requests  of  a 
particular  department  of  the  State,  such  as  the  Illinois  National  Guard, 
or  of  a particular  institution,  such  as  the  Eastern  Illinois  State  Normal 
School.  In  addition  to  the  schedules  already  discussed,  data  concerning 
each  particular  department  and  institution  should  be  set  up  in  separate 
schedule  form,  and  these  separate  schedules  should  be  accompanied  by 
supporting  statistics  as  to  the  work  done  by  the  departments  and  institu- 
tions under  each  of  their  activities. 

The  provision  for  separate  budget  schedules  for  each  department 
and  institution  is  of  fundamental  importance.  In  order  that  the  Legis- 
lature may  have  before  it  a summary  of  the  appropriation  requests  of 
all  the  departments  and  institutions  it  will  be  necessary  for  each  depart- 
ment and  institution  to  make  its  requests  under  a standard  classification. 
But  the  requirements  of  the  standard  classification  need  go  but  little 
further*  than  .the  fundamental  distinction  beween  requests  for  addi- 
tion to  land,  buildings  and  equipment  and  requests  for  operation  and 
maintenance.  Each  department  and  institution  of  the  State  has  its  own 
field  of  work  and  should  be  permitted  to  express  its  requirements  in 
terms  of  its  own  field.  This  is,  of  course,  the  particularly  difficult 
problem  of  classification  that  must  be  solved  by  the  authority  engaged 
in  the  preparation  of  the  statement  of  budget  proposals  for  the  Legis- 
lature. The  problem  is  emphasized  here  because  of  the  tendency  of 
budget  making  authorities  in  a few  States  and  cities  to  impose  a hard 
and  fast  uniform  classification  of  requests  upon  widely  varying  kinds  of 
departments  and  institutions. 

In  addition  to  the  financial  data  provided  for  in  the  schedules 
discussed  above,  a careful  digest  should  be  made  of  the  revenue  laws 


REPORT  ON  ACCOUNTS. 


47 


and  appropriation  acts  in  force  during  the  biennium,  at  the  close  of 
which  the  General  Assembly  meets.  This  digest  of  revenue  laws  and 
appropriation  acts  should  follow  the  same  classification  as  that  given  for 
revenue  and  appropriations  in  the  “proposed  budget.’’ 

Such  information  as  to  the  present  status  of  the  law  will  enable  the 
General  Assembly  to  consider  the  estimate  of  revenue  and  appropria- 
tion requests  in  connection  with  existing  law.  Such  consideration  must 
be  given  if  the  will  of  the  General  Assembly  as  to  the  estimate  of 
revenue  and  appropriations  is  to  be  fully  accomplished  by  changes  in 
the  laws.  Further,  these  laws  reflect  the  present  legal  accounting 
classification  that  the  Auditor  of  Public  Accounts,  departments  and 
institutions  are  compelled  to  keep.  If  officers  and  citizens  are  to  think 
aright  on  public  questions  they  must  have  reports  based  on  carefully 
classified  accounts.  It  must  be  emphasized  that  accounting  classifica- 
tion is  determined  by  statutory  requirements. 

The  summary  of  revenue  estimates  and  appropriation  requests  will 
place  squarely  before  the  General  Assembly  the  problem  of  financing 
the  needs  of  the  State  for  the  next  biennium.  Revenue  laws  and  tax 
rates  must  be  so  revised  and  appropriation  requests  must  be  so  increased 
or  reduced  as  to  bring  revenue  estimates  and  appropriations  into 
balance  in  the  final  budget  compiled  at  the  close  of  the  legislative 
session. 

All  of  the  above  information  should  be  compiled  by  the  office  of 
the  Governor,  or  by  the  budget  making  authority;  printed  and  pub- 
lished, so  that  it  may  be  available  to  members  of  the  General  Assembly, 
and  to  the  public  generally,  at  least  one  month  before  the  General 
Assembly  meets.  The  statement  of  budget  allotments  will  of  course 
contain  summaries  setting  forth  the  appropriations  requests  made 
against  each  fund  of  the  State.  These  summaries  should  be  accom- 
panied with  data  showing  the  increase  of  taxes,  fees,  licenses,  etc., 
necessary  if  the  total  amount  of  the  appropriation  requests  are  granted. 

The  statement  of  the  budget  proposals  should  contain  the  recom- 
mendations of  the  Governor  as  to  each  appropriation  request.  The 
exact  time  at  which  the  Governor  should  present  his  budget  and  budget 
recommendations  is  a matter  of  considerable  difficulty,  because  the 
term  of  the  Governor  commences  on  the  first  day  of  the  legislative 
session.  If  a budget  is  prepared  in  advance  of  the  legislative  session  it 
will  be  difficult  for  the  Governor-elect  to  make  his  recommendations ; 
and  the  Governor  whose  term  is  expiring  may  not  be  disposed  to 
make  responsible  recommendations  which  he  will  be  unable  to  defend 
before  the  General  Assembly  because  of  the  expiration  of  his  term. 
The  best  working  plan  will  doubtless  be  for  the  Governor  then  in  office 
to  include  tentative  recommendations  in  the  statement  of  the  budget 
proposals  that  is  published  thirty  days  before  the  General  Assembly 
meets.  These  tentative  recommendations  from  the  then  Governor,  can 
be  supplemented  or  revised  by  the  newly  elected  Governor  in  messages 
to  the  General  Assembly  at  or  after  the  beginning  of  the  legislative 
session. 

When  the  General  Assembly  meets,  or  as  soon  as  possible  there- 
after, a copy  of  the  '‘proposed  budget”  should  be  handed  to  each 


48 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


member,  together  with  a message  from  the  Governor,  giving  executive 
recommendations  as  to  each  estimate  of  revenue  and  as  to  each  appro- 
^priation  request  contained  therein.  These  copies  of  the  “proposed 
budget”  should  be  put  in  such  form  that  members  of  the  finance  com- 
mittees of  the  General  Assembly  can  enter  their  own  recommendations 
on  the  face  of  the  several  schedules,  and  thus  make  use  of  the  classifica- 
tion already  prepared  by  the  budget  making  authority.  The  clerks  of 
the  finance  committees  may  very  well  have  as  one  of  their  duties  the 
keeping  of  the  recommendations  of  the  finance  committees  in  the 
same  classification  as  the  “proposed  budget.”  The  clerk  should  note 
further  any  changes  that  may  be  made  in  revenue  laws  and  appropria- 
tion acts,  and  should  classify  such  changes  in  the  same  way  as  the 
digest  of  the  revenue  laws  and  the  appropriation  laws  are  classified  in 
the  “proposed  budget”  report.  As  the  General  Assembly  passes  new 
revenue  laws  and  new  appropriation  Acts,  the  clerks  of  the  finance 
committees  should  report  the  progress  of  the  budget,  so  that  members 
of  the  General  Assembly  can,  at  any  time,  find  out  how  far  the  financial 
program  of  the  State  has  been  affected  by  the  passage  of  any  particular 
revenue  law  or  appropriation.  This  will  pave  the  way  for  the  enact- 
ment as  one  bill  of  a complete  State  budget  of  revenue  estimates  and 
appropriations.  Such  a desideratum  will  evolve  from  the  plan  herein 
proposed  although  it  must  come  gradually,  having  in  mind  the  force  of 
present  legislative  traditions. 

At  the  end  of  the  legislative  session,  the  Auditor  of  Public 
Accounts,  cooperating  with  the  Secretary  of  State  (who  is  the  legal 
custodian  of  State  law)  should  compile  and  publish  a final  budget, 
containing  an  estimate  of  the  revenue  collectable  under  the  revenue 
laws  passed  by  the  General  Assembly,  and  containing  a statement  of 
the  appropriations  provided  by  the  General  Assembly.  This  final 
budget  should  be  classified  and  summarized  in  the  same  form  as  the 
“proposed  budget,”  so  that  officers  of  the  State  and  interested  citizens 
may  readily  compare  the  final  budget  with  the  “proposed  budget.” 

It  will  be  noted  that  the  classification  suggested  for  the  “proposed 
budget”  provides  that  each  department  and  institution  shall  place  before 
the  General  Assembly  a statement  of  the  appropriation  needed  for  each 
kind  of  service,  and  each  kind  of  materials,  to  be  secured  for  each 
activity  of  the  department,  or  institution.  It  will  be  easily  seen  that 
.data  in  such  classified  detail  is  necessary  if  the  legislature  is  to  thor- 
oughly consider  any  particular  appropriation  request.  It  by  no  means 
follows  that  the  Legislature  should  enact  appropriation  laws  carrying 
such  detail.  In  most,  if  not  in  all  cases,  the  General  Assembly  should 
provide  lump  appropriations  for  departments  and  institutions,  distin- 
guishing simply  between  appropriations  available,  on  the  one  hand,  for 
land,  buildings,  and  equipment,  and,  on  the  other  hand,  appropriations 
available  for  operation  and  maintenance  expenses.  In  turn,  the  heads  of 
departments  and  governing  boards  of  institutions  should  set  up  annual 
departmental  or  institutional  budgets  making  allotments  from  the  funds 
supplied  by  the  General  Assembly.  These  departmental  budgets  should 
provide  allotments  for  each  particular  project  under  land,  buildings 
and  equipment,  and  for  each  particular  activity  of  the  department  or 
institution  under  operation  and  maintenance. 


REPORT  ON  ACCOUNTS. 


49 


REPORTS  NEEDED  BY  THE  GOVERNOR. 

As  the  Chief  Executive  of  the  State,  the  Governor  is  constantly 
consulted  by  the  members  of  the  General  Assembly  as  to  the  proposed 
financial  program  of  the  State ; and  the  Governor  is  directly  and  con- 
tinuously concerned  with  State  finances  after  appropriations  are  passed 
by  the  General  Assembly.  The  Constitution  provides  that  the  Gov- 
ernor shall  make  a report  to  the  General  Assembly  setting  forth  the 
financial  needs  of  the  State.  The  Governors  of  Illinois  have  never 
complied  with  the  requirements  of  the  Constitution,  except  indirectly 
as  they  chose  to  advise  with  the  various  members  of  the  legislative 
body. 

After  the  Governor  has  presented  the  “proposed  budget”  for  the 
consideration  of  the  General  Assembly,  and  the  General  Assembly  has 
enacted  revenue  and  appropriation  laws,  the  Governor  needs  a com- 
plete report  setting  forth  in  accounting  form  the  results  to  be  ex- 
pected from  the  legislation.  The  Governor  needs  this  information, 
first  of  all,  as  a member  of  the  State  Tax  Levy  Board,  charged  with 
the  responsibility  of  fixing  the  tax  rate.  The  Governor  needs  this  in- 
formation further  in  checking  the  legal  audit  performed  by  the  Auditor 
of  Public  Accounts,  and  in  checking  upon  the  legal  accounts  main- 
tained in  the  office  of  the  Auditor.  The  Governor  needs  this  informa- 
tion if  he  is  properly  to  advise  the  departments  and  institutions  of  the 
State  as  to  revenues  available  to  them  for  carrying  on  the  work  for 
the  next  biennium.  Finally,  the  Governor  needs  such  a report  at  the 
close  of  the  legislative  session,  if  he  is  to  acquaint  the  public  with  the 
financial  situation  in  the  State  in  a definite  and  clear-cut  way. 

After  the  General  Assembly  has  provided  a financial  program,  the 
Governor  needs  reports  from  each  of  the  revenue  collecting  agencies 
of  the  State,  showing  the  manner  in  which  it  is  proposed  to  collect 
revenue ; and  a report  from  each  of  the  departments  and  institutions 
of  the  State,  showing  the  manner  in  which  each  department  and  each 
institution  proposes  to  spend  the  money  made  available  to  it  for  the 
next  biennium.  The  Governor  should  have  for  his  information  'depart- 
mental and  institutional  budgets  that  will,  on  the  one  hand,  take  into 
account  the  revenue  available  to  the  department  or  institution  for  the 
biennium,  and  will,  on  the  other  hand,  take  into  account  the  allot- 
ments to  be  made  within  the  department  or  institution  for  the  various 
activities  of  the  department  or  institution  for  each  year  of  the  bien- 
nium. The  form  of  the  departmental  or  institutional  budget  is  dis- 
cussed further  in  considering  the  accounting  needs  of  departments  and 
institutions. 

After  the  Governor  has  received  a report  from  each  revenue  col- 
lecting agency  of  the  State  as  to  the  revenue  collecting  plans  for  the 
biennium,  the  Governor  should  have  access  to  monthly  and  quarterly 
reports  showing  how  the  revenue  is  being  collected.  Without  access 
to  such  reports,  the  Governor  will  be  unable  to  make  an  intelligent 
study  of  the  revenue  collection.  Similarly,  after  the  Governor  has 
placed  before  him  the  internal  budget  of  each  department  and  of  each 
institution,  the  Governor  should  also  have  access  to  monthly  and 


50 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


quarterly  reports  showing  the  disbursements  and  outstanding  encum- 
brances under  each  one  of  the  allotments  made  for  the  internal  guid- 
ance of  each  department  and  institution. 

The  governor  should  have  access  to  frequent  reports,  perhaps 
monthly  reports,  showing  the  kinds  of  service  and  materials  purchased 
in  carrying  out  the  work  of  each  one  of  the  activities  of  each  depart- 
ment and  institution.  Without  free  access  to  such  cost  data,  the  Gov- 
ernor cannot  be  expected  to  exercise  any  check  upon  the  efficiency  and 
economy  with  which  departments  and  institutions  are  conducted. 

It  will  be  seen  that  the  Governor  needs  five  classes  of  reports. 
First  of  all,  the  Governor  needs  such  data  as  will  enable  him  to  make 
a report  to  the  General  Assembly  comparing  the  financial  needs  of 
the  State  with  the  revenue  and  expenditure  of  the  State  for  the  last 
preceding  biennium  and  for  the  biennium  at  the  close  of  which  the 
General  Assembly  meets.  Second,  the  Governor  needs  a report  at  the 
conclusion  of  the  meeting  of  the  General  Assembly  setting  forth  in 
definite  form  the  revenue  expected  under  the  revenue  laws  passed  by 
the  General  Assembly,  and  the  disbursements  possible  under  the  appro- 
priations passed  by  the  General  Assembly.  Third,  the  Governor  needs 
a statement  as  to  the  proposed  internal  budget  of  each  department 
and  institution  of  the  State  for  the  coming  biennium,  showing  how 
each  department  and  institution  expects  to  spend  the  money  available 
for  its  use  in  carrying  out  each  one  of  its  various  activities.  Fourth, 
the  Governor  should  have  access  to  monthly  and  quarterly  statements 
as  to  disbursements  and  outstanding  encumbrances  under  each  one  of 
the  allotments  provided  for  the  carrying  on  of  the  work  of  each  depart- 
ment and  institution.  And,  fifth,  the  Governor  should  have  cost  data 
available  for  his  use,  showing  the  kinds  of  service  and  kinds  of  mate- 
rial purchased  and  ordered  by  each  department  and  institution  in  carry- 
ing out  its  activities.  With  these  reports  at  hand,  the  Governor  will 
be  enabled  to  write  his  message  to  the  General  Assembly;  to  stimulate 
public  interest  in  public  business ; to  answer  in  a satisfactory  way  the 
questions  raised  by  citizens  who  have  been  made  interested  in  any  one 
of  the  activities  of  any  department  or  institution;  and  to  intervene 
intelligently  in  the  management  of  departments  and  institutions  both 
by  the  allocating  of  responsibility  and  the  ready  checking  of  such  detail 
as  may  become  important  in  its  relation  to  the  larger  problems  of  the 
State. 

The  office  of  the  Governor  is  now  provided  with  an  institutional 
auditor  whose  duty  it  is  to  check  the  receipts  and  disbursements  of 
most  of  the  departments  located  at  Springfield.  The  duties  of  this 
officer  arise  under  appropriation  Acts  providing  that  disbursements 
under  such  appropriations  shall  be  approved  by  the  Governor.  The 
Institutional  Auditor  also  reviews  the  semi-annual  financial  reports  as 
to  receipts  and  disbursements  now  made  to  the  Governor  by  the  de- 
partments and  institutions  of  the  State. 

Under  the  plan  of  the  accounting  proposed  herein,  the  Institutional 
Auditor  would  be  in  a position  to  call  for  reports  from  departments 
and  institutions  and  to  review  them  for  the  Governor,  as  well  as  to 
make  certain  that  the  Governor  has  prompt  access  to  any  one  of  the 


REPORT  ON  ACCOUNTS. 


51 


reports  contemplated  by  the  accounting  system  of  the  State.  The  Insti- 
tutional Auditor  will  then  be  enabled  to  call  for  such  further  special 
reports  as  the  Governor  may  need  in  addition  to  the  regular  monthly, 
quarterly  and  annual  reports. 

REPORTS  NEEDED  BY  THE  STATE  TAX  BOARD. 

It  is  the  duty  of  the  State  Tax  Board  (composed  of  the  Governor, 
the  Auditor  of  Public  Accounts,  and  the  State  Treasurer)  to  fix  such 
a rate  of  taxation  as  will  provide  receipts  for  the  various  funds  of  the 
State,  sufficient  in  amount  to  care  for  the  appropriations  passed  by 
the  General  Assembly.  The  State  Tax  Board  meets  for  work  at  the 
close  of  the  legislative  session,  and  must,  therefore,  know  the  status 
of  the  revenue  laws  and  of  appropriation  estimates  as  fixed  by  the  Acts 
of  the  Legislature.  After  the  State  Tax  Board  has  fixed  the  various 
rates  of  State  taxation,  a public  report  should  be  made  showing  the 
bases  on  which  the  rates  have  been  fixed. 

REPORTS  NEEDED  BY  THE  STATE  BOARD  OF  EQUALIZATION. 

The  State  Board  of  Equalization  is  charged  with  the  duty  of 
equalizing  the  assessment  rolls  for  the  various  counties  of  the  State, 
and  with  the  further  duty  of  assessing  the  values  of  railroad  property 
and  of  the  capital  stock  of  corporations.  In  performing  their  duties, 
the  members  of  the  Board  of  Equalization  need  to  have  before  them 
a very  considerable  amount  of  financial  data  having  to  do  with  values 
for  assessment  purposes.  The  Board  of  Equalization  should  be  fur- 
nished with  financial  data  in  classified  form.  If  a staff  of  constructive 
accountants  is  employed  by  the  State  for  constructive  accounting  work, 
such  accountants  may  very  well  be  called  upon  to  assist  in  properly 
classifying  the  data  needed  by  the  State  Board  of  Equalization. 

The  needs  of  the  State  Tax  Board  and  of  the  State  Board  of 
Equalization  will  become  the  needs  of  the  State  Tax  Commission  or 
of  the  State  Einance  Commission  if  such  a new  body  is  established. 

ACCOUNTS  AND  REPORTS  OF  THE  AUDITOR  OF  PUBLIC  ACCOUNTS. 

After  the  General  Assembly  adjourns,  the  responsibility  for  the 
carrying  out  of  its  will,  both  as  to  raising  revenue  and  as  to  the  ex- 
penditure of  public  money  and  public  credit,  devolves  upon  the  Auditor 
of  Public  Accounts.  The  Auditor  of  Public  Accounts  must  necessarily 
keep  such  accounts  as  will  enable  him  to  prove  that  moneys  collected 
have  been  collected  under  law,  and  such  accounts  as  will  enable  him 
to  prove  that  disbursements  have  been  made  in  accordance  with  ap- 
propriation Acts.  Any  real  reform  in  the  accounts  maintained  by  the 
State  Auditor  must,  therefore,  originate  in  the  budget-making  proc- 
ess of  the  Legislature.  If  the  General  Assembly  does  not  "enact  a 
scientifically  classified  system  of  taxation  and  of  revenue  laws,  nor  a 
scientific  classified  system  of  appropriation  laws,  it  cannot  very  well 
expect  the  State  Auditor  to  maintain  scientific  accounts  under  the  laws 
enacted.  Of  course,  it  is  quite  possible  that  the  State  Auditor  may 
maintain  two  sets  of  accounts,  so  that  he  accounts  for  public  money 
under  law  and  also  under  a scientific  classification  of  receipts  and  dis- 


52 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


bursements.  It  is  doubtful  whether  such  an  artificial  system  can  long 
continue  under  a representative  or  democratic  system  of  government. 
It  is  to  be  expected  that  the  State  Auditor  will  emphasize  the  accounts 
that  he  is  absolutely  required  to  keep,  and  that  he  will  minimize  the 
keeping  of  records  that  will  aflord  information  not  necessary  for  the 
discharge  of  legal  responsibilities,  however  necessary  and  valuable  the 
information  may  be  in  the  proper  interpretation  of  the  financial  pro- 
gram of  the  State. 

The  State  Auditor’s  records  are  of  vital  importance  in  any  con- 
sideration of  the  financial  system  of  the  State.  From  the  records  main- 
tained by  the  State  Auditor,  must  be  prepared  the  data  as  to  receipts 
and  disbursements  for  preceding  bienniums  necessary  for  the  use  of 
the  Legislature.  The  State  Auditor  should,  therefore,  keep  revenue 
accounts  so  analyzed  as  to  permit  of  the  making  of  comparisons  for 
budget  purposes,  as  well  as  to  permit  of  a careful  audit  as  to  revenue 
collectable  and  outstanding.  The  Auditor’s  accounts  as  to  the  dis- 
bursements under  appropriations  should  also  afford  the  analysis  of 
disbursements  necessary  in  setting  up  the  disbursement  side  of  the 
budget  report. 

It  would  be  possible  for  the  Auditor  to  maintain  a disbursement 
account  so  as  to  show  the  disbursements  for  each  of  the  activities  of 
each  department  and  institution,  and  also  so  as  to  show  the  disburse- 
ment for  each  kind  of  service  and  each  kind  of  materials  purchased 
for  each  such  activity.  Such  an  extended  analysis  of  disbursements 
would,  however,  greatly  hamper  the  efficiency  of  the  Auditor’s  office 
as  a collection  and  disbursement  agency.  The  same  information  is 
needed  at  each  of  the  departments  and  institutions.  The  purpose  can 
be  served  if  each  department  and  institution  is  required  to  keep  proper 
revenue  and  disbursement  accounts.  There  should  be  a constructive 
accounting  authority  with  power  to  prescribe  standard  cost  accounts 
and  standard  revenue  accounts.  The  Auditor  should  review  monthly 
and  quarterly  reports  of  departments  and  institutions  so  as  to  make 
certain  that  proper  revenue  analysis  and  cost  accounts  are  being  main- 
tained. The  Auditor  should  also  require  monthly  and  quarterly  re- 
ports from  departments  and  institutions  as  to  outstanding  encum- 
brances and  free  balances  of  the  internal  allotments  of  the  departments 
and  institutions.  In  no  other  way  can  the  Auditor  assure  himself  that 
departments  and  institutions  are  financing  their  work  in  such  a way 
as  to  insure  the  sufficiency  of  the  appropriations  provided  by  the  Leg- 
islature for  the  whole  period  during  which  such  work  must  be  car- 
ried on. 

If  the  Auditor  maintains  the  accounts  so  far  discussed,  and  if  the 
Auditor  audits  the  accounting  systems  prescribed  for  departments  and 
institutions  as  to  internal  allotment  balances  and  as  to  revenue  analysis 
and  cost  data,  the  Auditor  will  have  such  a system  of  accounts  as  he 
needs  in  making  a proper  check  upon  the  receipts  and  disbursements  of 
the  State  Treasurer. 

The  present  State  Law  requires  the  State  Auditor  to  maintain  a 
perpetual  inventory  upon  all  the  property  of  the  State,  based  upon 
detailed  reports  submitted  every  ten  days  by  departments  and  insti- 


REPORT  ON  ACCOUNTS. 


53 


tutions.  The  present  law  is  impracticable  and  should  be  repealed. 
The  Auditor  should  require  each  department  and  institution  to  main- 
tain a perpetual  inventory,  and  to  make  at  least  quarterly  reports  to 
him  of  additions  to  the  inventory  or  disposal  of  property.  The  Auditor 
should  maintain  control  accounts  over  the  perpetual  inventories  main- 
tained by  departments  and  institutions,  and  should  audit  and  review 
the  quarterly  and  annual  reports  of  departments  and  institutions  so 
that  he  may  be  able  to  certify  that  the  permanent  property  of  the 
State  is  protected  by  proper  inventory  and  accounting  methods.  To 
this  end,  departments  and  institutions  should  follow  a prescribed 
classification  of  permanent  property  in  maintaining  their  perpetual 
inventories. 

The  records  so  far  discussed  provide  for  controlling  accounts  in 
the  office  of  the  State  Auditor  with  revenue  collections  and  revenue 
collectable  and  with  disbursements  under  appropriations  and  outstand- 
ing encumbrances  against  appropriations.  The  records  provide  fur- 
ther for  controlling  accounts  summarizing  the  perpetual  inventories 
of  the  permanent  property  maintained  by  departments  and  institu- 
tions. From  this  data  the  State  Auditor  should  set  up  a consolidated 
balance  sheet  for  the  State  showing  the  total  assets  and  liabilities  of 
the  State  as  at  the  close  of  each  year.  The  Auditor  should,  set  up  such 
further  balance  sheets  as  may  be  necessary  to  show  surplus  of  the 
State  invested  in  permanent  property  for  various  classes  of  use,  and 
the  surplus  of  the  State  available  in  cash  and  stores  for  the  business 
transactions  of  the  coming  year. 

ACCOUNTING  NEEDS  OF  THE  STATE  TREASURER. 

The  State  Treasurer  requires  accounts  showing  his  transactions 
as  the  custodian  of  public  money.  For  all  auditing  purposes  accounts 
showing  receipts  and  disbursements  by  funds  are  sufficient  since  full 
detail  must  be  kept  by  the  State  Auditor. 

At  the  present  time,  the  State  Treasurer  maintains  a ledger  show- 
ing the  amounts  of  public  money  deposited  in  the  banks  selected  as 
depositaries  of  State  funds.  This  ledger  is  not  an  official  record. 
Even  though  the  State  Treasurer  is  liable  on  his  bond  for  the  entire 
amount  of  public  money  in  his  charge,  it  seems  obvious  that  there 
should  be  a public  record  of  the  depositaries  in  which  State  money  is 
deposited.  There  should  be  daily  reconcilements  between  accounts 
with  the  depositaries  and  the  accounts  showing  the  cash  balances  in 
each  of  the  funds  of  the  State. 

Further  than  this,  it  is  to  be  noted  that  the  treasurer  at  present 
acts  as  the  agent  of  the  State  in  paying  interest  on  certain  public  bonds. 
This  part  of  the  work  of  the  State  Treasurer’s  office  should  be  fre- 
quently reviewed  by  the  State  Auditor,  and  the  State  Treasurer  should 
be  required  to  keep  such  accounts  as  will  clearly  set  forth  his  trans- 
actions in  this  particular. 

ACCOUNTING  NEEDS  OF  REVENUE  COLLECTING  AGENCIES. 

The  revenue  collecting  agencies  of  the  State  should  make  monthly 
reports  to  the  State  Auditor  showing  the  amount  of  each  kind  of  rev- 
enue collected  by  them  during  the  month  and  the  amount  of  revenue 
collectable  outstanding  at  the  close  of  the  month.  These  monthly  re- 


54 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


ports  of  receipts  and  revenue  collectable  should  be  made  in  schedules 
entirely  separate  from  any  reports  that  may  be  made  as  to  disburse- 
ments, excepting  in  the  case  of  industries  of  the  semi-commercial 
nature,  such  as  the  industries  of  the  State  prison.  It  should  be  borne 
in  mind  that  nearly  all  of  the  revenues  of  the  State  are  only  indirectly 
related  to  disbursements  under  appropriations. 

ACCOUNTING  NEEDS  OF  HEADS  OF  DEPARTMENTS  AND  BOARDS  IN 
CHARGE  OF  STATE  INSTITUTIONS. 

The  executive  officers  of  departments  and  institutions  need,  first 
of  all,  to  have  in  their  possession  a copy  of  the  budget  proposal  con- 
sidered by  the  General  Assembly  and  a copy  of  the  budget  passed  by 
the  General  Assembly.  This  information  is  needed  so  that  department 
and  institution  officers  may  properly  allocate  their  departments  and 
institutions  as  integral  parts  of  the  State  financial  program. 

After  the  General  Assembly  adjourns,  the  heads  of  departments 
and  institutional  officers  should  be  furnished  by  the  State  Auditor  with 
specific  information  as  to  the  revenue  available  for  their  use  during 
each  year  of  the  coming  biennium.  The  State  appropriations  available 
for  the  use  of  departments  and  institutions,  together  with  an  estimate 
of  the  revenue  collectable  by  the  department  or  institution  that  may  be 
retained  under  law,  constitutes  the  available  income  under  which  the 
work  of  the  department  or  institution  must  be  carried  on.  The  officer, 
or  governing  board,  should  build  up  a budget  showing  the  available 
income  of  the  department  or  institution  as  over  against  allotments 
covering  the  estimated  cost  of  carrying  out  each  one  of  the  activities  of 
the  institution.  This  departmental  budget  should  be  approved  by  the 
head  of  the  department,  or  enacted  by  the  board  of  trustees  in  charge  of 
the  institution,  before  the  beginning  of  each  year  of  the  biennium. 

The  procedure  in  making  the  local  budget  for  a department  or 
institution  should  follow  the  same  lines  as  the  procedure  already  indi- 
cated for  the  State  budget.  The  responsible  executives  of  the  depart- 
ment or  institution  should  first  of  all  compile  a statement  of  budget 
proposals.  Allotment  requests  should  be  classified  so  as  to  show  the 
amounts  requested  for  each  project  under  additions  to  land,  buildings 
and  permanent  equipment,  and  so  as  to  show  the  total  amount  requested 
for  each  sub-department  or  activity  under  proposed  operation  and  main- 
tenance expense.  The  request  for  each  allotment  should  be  supported 
by  detail  giving  an  estimate  of  the  cost  of  each  kind  of  service  and  of 
each  kind  of  material  needed  in  carrying  on  the  work  of  the  activity 
for  which  the  allotment  is  requested.  The  financial  data  for  each 
project  and  activity  should  be  detailed  in  a supplementary  statement 
together  with  data  as  to  the  work  program  proposed  under  the  project 
or  activity  for  the  year.  The  allotment  requests  should  be  summarized 
as  over  against  an  estimate  of  the  revenue  available  to  the  department 
or  institution  for  the  year.  This  estimate  of  revenue  should  be  classified 
by  sources  and  kinds.  The  budget  proposals  should  be  compared  with 
the  revenue  and  disbursements  of  at  least  three  preceding  years.  The 
form  of  such  a statement  of  budget  proposals  for  a State  normal  school 
is  shown  in  schedule  5.  The  items  given  are  hypothetical  and  the 
schedule  is  shown  by  way  of  illustration  only.  < . , . . 


SCHEDULE  5. 

Budget  Proposals  for  the State  Normal  School  for  the 

Year  igi/-ipi8. 


REPORT  ON  ACCOUNTS. 


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56 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


The  statement  of  budget  proposals  for  the  year  should  be  accom- 
panied by  a digest  of  State  laws  and  regulations  directly  affecting  the 
finances  of  the  department  or  institution. 

After  consideration,  the  governing  board  of  the  institution  or  head 
of  the  department  should  adopt  a final  budget  for  the  year.  Allotments 
in  the  final  budget  should  be  by  projects  and  activities  and  should  not 
be  detailed  as  to  expense  items.  Expense  items  and  wages  of  non- 
technical employees  should  be  left  to  the  discretion  of  responsible 
executives.  There  are,  however,  important  arguments  to  support  the 
view  that  the  local  budget  of  each  department  and  institution  should 
give  the  salaries  of  permanent  positions  in  detail. 

The  final  budget  of  the  year  should  be  placed  in  the  hands  of  the 
financial  officer  of  the  department  or  institution  as  the  official  basis  for 
receipts  and  disbursements  and  for  accounts. 

The  statement  of  budget  proposals  with  its  auxiliary  statements 
of  work  programs  by  activities,  the  digest  of  laws  and  the  final  budget 
should  be  made  a matter  of  systematic  record  even  in  the  case  of  small 
departments  and  institutions.  The  larger  institutions  of  the  State  now 
have  such  procedure,  although  in  some  cases  the  allotment  requests  and 
work  programs,  and  even  the  final  allotments,  are  made  informally 
and  without  sufficient  record  for  systematic  administration.  The  re- 
quirement of  such  records  in  writing  before  the  beginning  of  each  fiscal 
year  insures  careful  planning  and  affords  an  authentic  basis  for  finan- 
cial administration  and  accounting. 

The  monthly  reports  of  departments  and  institutions  acting  as 
revenue  collection  agencies  should  include  schedules  showing  revenue 
collected  and  revenue  receivable  classified  by  kinds  of  revenue.  Such  a 
monthly  report  as  to  revenue  will  afford  a record  of  receipts  and  will 
afford  also  a statement  of  accounts  receivable  and  revenue  collectable 
comparable  with  the  estimate  of  revenue  contained  in  the  departmental 
or  institutional  budget  and  summarized  in  the  State  budget. 


SCHEDULE  6. 

Department  of 

Statement  of  Free  Balances  in  Allotments  for  the  Month 


REPORT  ON  ACCOUNTS. 


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58 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


Those  in  charge  of  departments  and  institutions  will  need  a report 
at  the  close  of  each  month  showing  the  disbursements  and  outstanding 
encumbrances  under  each  one  of  the  allotments  made  by  them.  Such  a 
report  may  properly  be  put  in  the  form  shown  in  Schedule  6. 

The  monthly  statement  of  disbursements  and  encumbrances  under 
allotments  will  serve,  first  of  all,  to  acquaint  the  officers  of  the  depart- 
ment or  institution  with  the  balance  in  each  allotment,  against  which 
further  open  market  orders,  contracts  and  salary  assignments  can  be 
placed.  The  monthly  statement  of  disbursements  and  of  encumbrances 
will  also  be  comparable  with  the  statement  of  allotments  contained  in 
the  departmental  or  institutional  budget  for  the  year  and  will  be  com- 
parable with  the  appropriations  for  the  biennium  contained  in  the  State 
budget. 

Recent  writers  on  governmental  accounting  have  been  insistent  in 
demanding  records  of  accounts  payable.  Records  of  open  market 
orders  outstanding,  of  contracts  outstanding,  and  of  salary  assignments 
should  be  inclusive  both  of  accounts  payable  and  of  contractual  obliga- 
tions for  goods  and  services  not  yet  received  but  for  which  the  credit  of 
the  State  is  pledged  in  a practical  sense.  Reports  from  such  records 
must  be  constantly  studied  if  administrator^  are  to  keep  the  expenses 
of  a year  within  the  legal  appropriations  for  the  period. 

Accounts  should  be  maintained  showing  the  kind  of  services  and 
kinds  of  materials  purchased  under  each  of  the  allotments  made  for 
carrying  out  each  activity,  and  this  cost  data  should  be  brought  together 
in  such  form  that  it  may  be  analyzed  by  responsible  executives  and 
trustees  in  connection  with  any  of  the  plans  of  the  department  or  insti- 
tution. A perpetual  inventory  should  be  maintained  of  property  of  the 
department  or  institution,  and  quarterly  reports  should  be  made  as  to 
additions  to  permanent  property  and  as  to  disposal  of  permanent 
property. 

It  should  be  possible  to  set  up  an  annual  balance  sheet  from  the 
records  of  revenue  collectable  and  outstanding  encumbrances  and  from 
the  perpetual  inventory  records  maintained  by  each  department  or  insti- 
tution. In  addition  to  the  general  balance  sheet,  it  will  be  found  desir- 
able to  set  up  a separate  balance  sheet  at  the  close  of  each  year  for  any 
trust  fund  held  by  the  department  or  institution. 

Not  less  frequently  than  once  a year  each  department  and  institu- 
tion should  issue  a public  report  setting  forth  the  receipts  under  each 
kind  of  revenue  collected  by  it  and  the  disbursements  for  each  of  its 
activities,  together  with  a balance  sheet  giving  a summary  of  the  assets 
and  liabilities  of  the  institution  with  supporting  schedules  summarizing 
the  perpetual  inventory  of  permanent  property.  It  is  advisable  that 
such  published  reports  should  contain  statistics  as  to  the  various  kinds 
of  work  carried  on  by  the  institution,  so  that  the  citizens  of  the  State 
may  compare  the  amounts  expended  for  each  class  of  work  with  the 
actual  work  accomplished. 

ACCOUNTING  NEEDS  OF  INSTITUTIONAL  AND  DEPARTMENTAL 
EXECUTIVES. 

The  responsible  executives  and  subordinate  officers  and  heads  of 
departments  need  to  have  before  them  all  of  the  information  which  we 


REPORT  ON  ACCOUNTS. 


59 


have  discussed  as  desirable  for  review  by  boards  of  trustees  and  heads 
of  departments.  That  is  to  say,  these  officers  should  have  a report 
setting  forth  the  budget  passed  by  the  General  Assembly,  so  that  they 
may  allocate  their  activities  with  those  of  the  State  at  large.  The 
officers  should  have  an  institutional  or  departmental  budget  with 
monthly  reports  as  to  disbursements,  outstanding  encumbrances  and 
available  balances  in  allotments.  The  officers  should  have  monthly 
reports  giving  cost  data  and  statistics  showing  the  kind  of  service  and 
kind  of  materials  that  they  themselves  are  purchasing  for  their  own  use. 
Further,  the  officers  should  have  at  last  quarterly  reports  on  the 
inventory  of  the  property  for  which  they  are  responsible. 

The  officers  mentioned  will  be  responsible  for  the  making  out  of 
the  reports  discussed  under  preceding  headings.  They  should  be  pro- 
vided by  the  State  Auditor  with  regulations  as  to  accounting  methods 
and  prescribed  classifications  of  accounts  with  definitions. 

If  such  accounting  systems  are  maintained  at  the  institutions  and 
departments  as  will  enable  the  officers  to  prepare  and  have  before  them 
the  reports  mentioned,  it  is  obvious  that  accounts  must  be  kept  from 
day  to  day  showing  each  one  of  the  difiFerent  classes  of  information. 
These  accounts  will  be  frequently  referred  to  by  officers,  and  various 
abstracts  of  data  may  be  secured  from  the  accounts  of  value  in  solving 
particular  problems  of  administration.* 

ACCOUNTING  NEEDS  OF  EMPLOYES  OF  DEPARTMENTS 
AND  INSTITUTIONS. 

The  employees  in  each  one  of  the  sub-departments  of  a depart- 
ment or  institution  should  be  informed  from  month  to  month  as  to  the 
status  of  the  allotment  made  for  the  support  of  their  own  activities. 
More  than  this,  such  employees  should  be  provided  with  cost  data  not 
less  frequently  than  once  a month,  so  that  they  themselves  may  feel  a 
sense  of  responsibility  for  the  volume  and  kinds  of  services  and  mater- 
ials they  are  using.  Such  employees  will  have  a direct  responsibility 
in  connection  with  the  safeguarding  and  maintenance  of  permanent 
property,  and  for  that  reason  should  have  access  to  the  perpetual 
inventory  records  of  the  department  or  institution  with  which  they  are 
connected 

ACCOUNTING  NEEDS  OF  THE  PUBLIC. 

The  citizens  of  the  State  will  be  concerned,  first  of  all,  as  tax 
pavers,  and  for  that  reason  can  be  expected  to  welcome  and  use  a 
published  State  budget.  The  citizens  should  have  an  opportunity  to 
examine  and  discuss  the  proposed  revenue  collection  and  the  proposed 
appropriations  before  the  General  Assemblv  goes  into  session.  Citizens 
should  be  given  an  opportunity  to  talk  with  members  of  the  General 
Assembly.  Interested  citizens  will  avail  themselves  of  this  opportunity 
whether  or  not  they  have  before  them  a complete  statement  of  the 
financial  needs  of  the  entire  State  and  of  the  particular  financial  needs 
of  each  department  and  institution  of  the  State.  If  such  a complete 
statement  is  before  them,  citizens  can  be  expected  to  use  far  more  in- 
telligence in  the  pressure  that  they  bring  upon  their  representatives  in 
the  General  Assembly,  and  upon  the  Governor  as  to  financing  of  par- 
ticular activities. 


60 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


At  the  conclusion  of  the  legislative  session,  the  General  Assembly 
should  be  put  squarely  on  record  before  the  citizens  of  the  State  by 
the  publication  of  a statement  setting  forth  the  revenue  collection 
authorized  by  the  General  Assembly  for  the  next  biennium,  and  the 
appropriations  enacted,  classified  in  such  a way  that  the  citizens  may 
understand  the  work  that  is  to  be  carried  on  under  the  appropriation 
Acts.  This  statement  may  also  be  used  by  the  State  Tax  Board  in 
announcing  its  reasons  to  the  public  as  to  the  fixing  of  State  tax  rates. 

The  citizens  of  the  State  have  a right  to  expect  that  the  report  of 
the  State  Auditor  shall  show  the  safeguarding  of  public  money  and 
public  credit  so  far  as  the  report  provides  a check  upon  the  cash  tran- 
sactions through  the  State  treasury.  This  much  the  present  report  of 
the  State  Auditor  does.  The  report  of  the  State  Auditor  should  include 
a budget  summary  for  the  biennium,  and  should  include  further  an 
analysis  of  State  revenue  by  (1)  kinds  of  taxes  by  years  levied; 
(2)  various  kinds  of  fixed  licenses  and  permits;  (3)  various  kinds  of 
receipts  of  institutions  and  departments.  The  report  of  the  State 
Auditor  should  set  forth  disbursement  accounts  under  legislative  appro- 
priations, so  analyzed  as  to  show  the  amounts  of  public  money  expended 
for  each  department  and  institution  of  the  State,  and  so  analyzed  also 
as  to  show  the  amount  of  public  money  spent  for  each  principal  function 
of  State  government  in  each  one  of  the  State  departments  and  institu- 
tions and  for  the  State  as  a whole.  The  report  of  the  State  x\uditor 
should  contain  a summary  of  the  perpetual  inventories  maintained  by 
departments  and  institutions,  and  balance  sheets  exhibiting  the  assets 
and  liabilities  of  the  State  in  summary  form. 

The  present  form  of  the  State  Treasurer’s  report  should  be  con- 
tinued for  the  use  of  the  public,  and,  in  addition  thereto,  the  public 
should  be  given  information  as  to  the  amount  of  money  handled  by 
each  bank  acting  as  depository  of  State  funds. 

The  budget  reports  and  the  reports  of  the  State  Auditor  and  State 
Treasurer  should  furnish  the  general  information  desired  by  the  public. 
Particular  classes  of  the  public  will  be  interested  in  each  one  of  the 
departments  and  in  each  one  of  the  institutions  of  the  State.  Each 
department  and  each  institution  should  print  and  publish  annually  a 
financial  report  setting  forth  the  revenue  available  for  the  department 
or  institution,  classified  as  to  the  source  of  its  collection,  and  the  dis- 
bursements of  the  department  or  institution  on  account  of  each  one  of 
the  activities  carried  on  by  it.  Such  annual  reports  may  very  well 
give  the  budget  of  the  department  or  institution  as  passed  by  the  board 
of  trustees  or  executive  head  at  the  beginning  of  the  fiscal  year,  together 
with  a statement  of  the  budget  as  at  the  close  of  the  year  reported. 
Further  than  this  the  printed  report  of  each  department  and  institution 
should  summarize  the  inventory  of  permanent  property  of  the  depart- 
ment or  institution,  and  should  present  a balance  sheet  exhibiting  the 
assets  and  liabilities  of  the  department  or  institution  at  the  close  of  the 
year.  The  reports  of  the  departments  or  instituions  will  be  made  very 
much  more  valuable  for  the  use  by  the  public  generally,  and  especially 
for  use  by  persons  particularly  interested  in  the  work  of  a particular  de- 
partment or  institution,  if  the  reports  combine  statistical  data  as  to  the 
activities  of  the  institution  with  the  statements  of  revenue  and  expendi- 
ture. 


REPORT  ON  ACCOUNTS. 


61 


A PLAN  OF  ACCOUNTING  FOR  THE  STATE. 

If  the  accounting  needs  of  each  of  the  various  classes  of  officers 
and  citizens  that  we  have  discussed  are  met,  there  must  be  established 
in  the  State  a definite  plan  of  reporting  and  accounting.  The  following 
system  of  reports  is  suggested : 

1.  Upon  the  adjournment  of  the  General  Assembly,  the  Auditor 
of  Public  Accounts  shall  prepare  and  publish  schedules  setting  forth 
the  budget  of  the  State*  as  passed  by  the  General  Assembly.  This 
published  statement  may  very  well  include  a record  of  the  action  of  the 
State  board  in  the  fixing  of  State  tax  rates. 

2.  The  Auditor  of  Public  Accounts  shall  open  accounts  on  his 
books  with  each  of  the  sources  of  revenue  set  forth  in  the  State  budget, 
and  with  each  of  the  appropriation  Acts  at  the  beginning  of  the  bien- 
nium, during  which  the  budget  is  to  have  eflFect. 

3.  The  State  Treasurer  shall  open  accounts  with  each  of  the  State 
funds  authorized  by  law,  and  with  each  of  the  depositaries  in  which 
money  is  deposited. 

4.  The  Auditor  of  Public  Accounts  shall  notify  each  revenue 
collection  agency  of  the  revenue  to  be  collected  by  the  agency  during 
each  year  of  the  biennium,  and  shall  notify  each  department  and  insti- 
tution of  the  authorization  contained  in  the  budget  for  its  support. 

5.  Each  department  and  institution  of  the  State  shall  prepare  an 
internal  budget  of  allotments,  definitely  assigning  a portion  of  the 
income  at  its  disposal  for  the  support  of  each  one  of  the  activities  that 
it  carries  on.  These  internal  budgets  shall  be  formally  approved  by 
the  board  of  trustees  of  each  institution,  or  by  the  responsible  heads 
of  departments,  before  the  beginning  of  each  year  of  the  biennium, 
and  copies  of  the  internal  budgets  so  approved  shall  be  sent  to  the 
State  Auditor  for  the  information  and  guidance  of  the  State  Auditor 
and  of  the  Governor. 

6.  The  financial  officer  of  each  department  and  institution  shall 
open  accounts  with  each  of  the  sources  of  income  for  the  department 
or  institution,  and  with  each  of  the  allotments  contained  in  the  internal 
budget  for  the  department  or  institution.  Under  each  of  such  accounts, 
he  shall  maintain  such  an  analysis  and  classification  of  data  as  shall 
be  prescribed  for  his  use. 

7.  Each  department  and  each  institution  shall  open  and  maintain 
perpetual  inventory  accounts,  giving  complete  report  of  the  permanent 
property  held  by  the  department  or  institution,  following  such  classifica- 
tion as  may  be  prescribed  by  the  constructive  accounting  authority 
of  the  State. 

8.  The  financial  officer  of  each  revenue  collecting  agency  shall 
report  to  the  State  Auditor  from  month  to  month  the  revenue  collected 
by  him,  and  shall  fully  account  for  such  revenue  as  having  passed  into 
the  hands  of  the  State  Auditor  for  transmission  to  the  State  Treasurer 

9.  At  the  close  of  each  month,  the  financial  officers  of  each  de- 
partment and  institution  shall  make  a complete  report  as  to  the  receipts 
and  revenue  collectable  under  each  of  the  sources  of  revenue  of  the 
department  or  institution,  and  as  to  the  disbursements,  outstanding 
encumbrances  and  available  balance  in  each  of  the  'allotments  contained 


62 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


in  the  internal  budget  of  the  department  or  institution.  Copies  of  this 
report  shall  be  furnished  to  the  executive  head  of  each  department,  or 
to  the  members  of  the  board  of  trustees  in  charge  of  each  institution, 
and  to  the  State  Auditor.  Under  the  direction  of  the  head  of  the  de- 
partment, or  of  the  board  of  trustees,  as  the  case  may  be,  the  financial 
officer  shall  transmit  information  as  to  the  disbursements,  outstanding 
encumbrances  and  free  balance  in  each  allotment  to  such  employees 
of  the  department  or  institution  as  may  have  occasion  to  use  such  in- 
formation in  carrying  out  the  purpose  of  the  allotment. 

10.  At  the  close  of  the  quarter,  a report  similar  in  scope  to  the 
monthly  report  shall  be  made  by  the  financial  officer  of  each  department 
and  institution,  and  shall  be  presented  to  the  State  Auditor.  The  State 
Auditor  shall  audit  such  reports  and  compare  them  with  his  controlling 
accounts.  Whenever  possible,  such  reports  shall  be  made  a matter  of 
record  in  the  printed  minutes  of  the  governing  boards. 

11.  At  the  close  of  each  quarter,  each  department  and  institution 
shall  make  a report  to  the  Auditor  of  Public  Accounts  as  to  the  perpetual 
inventory  of  permanent  property  of  the  department  or  institution. 

12.  At  the  close  of  each  year,  each  department  and  institution 
shall  publish  a financial  report  addressed  to  the  Governor  of  the  State, 
and  certified  as  correct  by  the  Auditor  of  Public  Accounts,  giving  a 
detailed  analysis  of  the  collection  of  revenues,  and  giving  detailed 
analysis  of  disbursements  under  allotments,  together  with  a balance 
sheet  and  summaries  of  the  permanent  property  held  by  the  depart- 
ment or  institution. 

13.  At  least  sixty  days  before  the  beginning  of  each  legislative 
session,  each  department  and  institution  of  the  State  shall  prepare  a 
statement  in  detail  of  its  disbursements  for  the  preceding  biennium, 
and  an  estimate  of  its  disbursements  for  the  present  biennium,  together 
with  an  estimate  of  its  needs  for  the  coming  biennium ; and  shall 
present  this  report  to  the  budget-making  authorities  of  the  State  and 
to  the  Governor  of  the  State. 

14.  The  budget-making  authorities  of  the  State  shall  combine  the 
reports  transmitted  by  the  departments  and  the  recommendations  of  the 
Governor  into  a statement  setting  forth  the  proposed  financial  program 
of  the  State.  This  report  shall  be  printed  and  distributed  to  the  mem- 
bers of  the  General  Assembly  and  to  the  public  at  large  at  least  thirty 
days  before  the  meeting  of  the  General  Assembly. 

15.  At  the  close  of  each  biennium,  the  Auditor  of  Public  Accounts 
shall  prepare  and  publish  a report  setting  forth  a summary  of  the  ac- 
counts of  his  office,  and  showing  the  revenue  collected  and  money  dis- 
bursed under  the  budget  adopted  by  the  General  Assembly  for  the 
biennium  under  review.  This  report  shall  include  a reconcilement 
with  the  accounts  of  the  State  Treasurer,  and  a balance  sheet  with 
summaries  of  the  inventories  of  permanent  property  of  the  State. 

It  will  be  seen  that  this  plan  of  reporting  and  accounting  pro- 
vides (1)  for  a budget  for  the  State;  (2)  for  departmental  and  insti- 
tutional budgets  under  the  general  provisions  contained  in  the  State 
budget;  and  (3)  for  monthly,  quarterly  and  annual  reports  by  depart- 
ments and  institutions  following  classifications  to  be  prescribed  by  the 


REPORT  ON  ACCOUNTS. 


63 


. » 


constructive  accounting  authority  of  the  State.  , This  system  of  report- 
ing and  accounting  will  periodically  furnish  the  information  needed 
b,y  heads  of  departments  and  boards  of  institutions  in  making  internal 
budgets  for  their  departments  and  institutions,  and  in  presenting  their 
needs  to  the  budget-making  authorities  of  the  State.  The  system  will 
periodically  furnish  the  data  needed  for  a complete  State  budget  for 
consideration  by  the  General  Assembly.  The  plan  provides  a com- 
plete report  by  the  Auditor  of  Public  Accounts  at  the  close  of  the 
biennium  as  to  the  results  obtained  under  the  budget  for  the  biennium, 
and  provides  also  for  a complete  annual  report  by  each  department 
an»d  institution. 

It  is  obvious,  of  course,  that  a great  deal  of  constructive  account- 
ing work  must  be  done  in  providing  the  proper  classification  of  rev- 
enue and  expenditure,  and  in  providing  a proper  classification  for  the 
perpetual  inventories  to  be  maintained  by  departments  and  institu- 
tions. The  plan  proposed  will  not  increase  the  volume  of  accounts 
as  OYer  against  the  present  volume  of  data  made  a matter  of  record 
at  d(ipartments  and  institutions,  and  in  the  State  offices.  The  plan 
provides  for  systematic  reporting  of  data  maintained  under  uniform 
classifications  to  be  prescribed,  and  for  the  enforcement  of  the  system 
by  audits  of  the  Auditor  of  Public  Accounts. 

, CONSTRUCTIVE  ACCOUNTING  WORK  TO  BE  DONE. 

To  provide  the  system  of  accounting  described  in  this  report,  a 
caref  ul  study  must  be  made  of  the  present  State  organization.  Charts 
should  be  prepared  showing  the  organization  of  the  State  by  units  of 
orgamization,  and  by  functions. 

A careful  study  must  be  made  of  the  present  laws  of  the  State, 
and  digests  should  be  set  up  so  as  to  show  in  outline  form  the  status 
of  the  present  laws  as  to  revenue  collections,  disbursements,  custody 
of  public  money,  auditing  of  transactions,  and  care  of  public  property, 
as  well  as  to  showing  the  financial  organization  of  the  State. 

The  present  financial  reports  of  the  State  should  be  carefully 
analyzed  so  as  to  show  the  kinds  of  revenue  now  collected  and  the 
nature  of  present  disbursements  and  present  appropriation  Acts. 

A budget  classification  should  be  set  up  for  the  State  and  for 
each  department  and  institution.  Classifications  of  accounts  should  be 
presc.ril^d  for  each  department  and  institution  and  the  accounts  named 
in  such  prescribed  classifications  should  be  carefully  defined.  The 
form.'s  of  schedules  in  reports  suggested  should  be  prescribed,  methods 
should  be  provided  for  the  auditing  of  accounts  and  reports,  and  care- 
ful study  should  be  done  in  the  establishment  of  accounting  procedure. 
Finally,  the  installation  of  such  an  accounting  system  as  the  one  asked 
for  in  this  report  demands  the  training  of  State  employees  so  that  they 
may  be  able  to  understand  the  requirements  of  the  proposed  system 
and  make  intelligent  use  of  the  data  that  the  system  affords. 

It  will  be  seen  that  the  problem  of  constructive  accounting  for 
tffe  State  of  Illinois  is  a problem  large  in  scope  and  difficult  in  its 
rcjquirements.  Something  can  be  accomplished  toward  better  State 
accounting  by  efforts  made  in  the  accounting  offices  of  the  departments 


64 


EFFICIENCY  AND  ECONOMY  COMMITTEE. 


and  institutions,  since  better  accounting  at  any  State  institution  or  by 
any  State  department  in  itself  tends  to  improve  the  accounts  kept  at 
other  State  offices.  Something  can  also  be  done  by  recommendations 
by  such  bodies  as  the  present  Economy  and  Efficiency  Committee, 
since  such  recommendations  will  be  studied  by  those  concerned  with 
the  administration  of  departments  and  institutions  and  it  is  to  be 
expected  that  many  of  the  recommendations  will  be  adopted.  The 
actual  installation  of  the  complete  system  of  accounts  for  the  State 
can  best  be  accomplished,  however,  by  the  creation  of  a constructive 
accounting  agency,  either  within  the  office,  of  the  State  Auditor  or 
under  the  control  of  the  Governor,  as  a part  of  a State  Tax  Commis- 
sion or  State  Finance  Commission.  A permanent  staff  of  constructive 
accountants  of  experience  and  ability  should  be  employed  not  only  to 
install  a system  but  to  review  its  operations  and  to  effect  changes  needed 
by  changing  conditions. 


